After the Victory, Ukraine will be in dire need of investment to restore the economy – both domestic and foreign. Already today we can hear statements that it would be good to direct for this purpose the assets accumulated in domestic investment funds and private pension funds. There are also statements that it is necessary to simplify the access of Ukrainian companies to European stock exchanges to attract share capital. So far we are talking about the Warsaw and London stock exchanges. Delo.ua inquired about the prospects of the domestic securities market and the possibilities of attracting international capital to Ukraine from the Сhairman of the NSSMC Ruslan Magomedov.
About non-residents and the russian trace
– The NSSMC intends to analyze the presence of residents and companies from the russian federation in domestic capital markets to reduce their influence and minimize threats to Ukraine’s financial markets. If russian owners are found in companies, what events should we expect?
Ruslan Magomedov: This issue is related to the economic security of the country. I mean not only the ability of representatives of the aggressor country to earn in Ukrainian markets, but also to influence the actions of market participants, including restraining or collapsing markets.
The NSSMC is taking the necessary steps to identify such a «trace» and will work with other public authorities to analyze the data obtained, as each market is specific. And the final resolutions on further action will be made by the competent authorities with the appropriate powers.
– At the same time, you stated that foreigners will benefit from investing in Ukrainian securities, because after the war, «Ukraine’s promising market will grow rapidly».What is your optimism about?
– Those who now invest in Ukrainian securities, make a purchase «at the bottom», that is at the most attractive prices.
At present, Ukraine’s economy simply cannot physically demonstrate high financial performance due to the fact that there is fighting on our land and the lion’s share of money is spent on the needs of war.
After we win, all funds will be used to build our country. I am sure that the whole world will help us to rebuild Ukraine as soon as possible. Therefore, I expect that the indicators of the Ukrainian financial system will grow rapidly after the end of the war.
– When and how will it be possible to increase the volume of investments of non-residents in the Ukrainian stock market?
– In order to attract foreign capital to the Ukrainian market, it is necessary to simplify a number of procedural points of admission, namely the mechanism of opening securities accounts and currency control.
Currently, these procedures are very regulated and therefore scare away foreign investors. The NSSMC is working to simplify regulation, and we already have good results in this direction. The mental and economic ties of a country with Ukraine must also be taken into account.
For example, our companies have a positive experience with public offerings on the Warsaw Stock Exchange. In addition, the perception of the relevant financial center of the industries in which the potential issuer operates should be taken into account.
Today, the NSSMC cooperates with many international financial centers. On the one hand, the capacity of such markets is not constant, and on the other hand, it is necessary to meet the standards of most financial platforms. In particular, on the transparency of the ownership structure and the quality of the corporate governance system.
– In your opinion, which of our companies and sectors will be the most in demand among foreigners?
– In my opinion, these will be the issuers of the real sector of the economy, because these industries will show the greatest growth. As for specific issuers, I must refrain from company names. At the same time, I would like to emphasize that we are working on the qualitative growth of capital markets and are ready to provide methodological assistance to domestic companies for placement on international capital markets.
On entering foreign capital markets
– On how to simplify the entry of our companies into the global capital market. Ukraine, in particular, is considering entering the UK capital markets (London Stock Exchange). How quickly will this happen in a war? Should we expect a victory?
– Since the beginning of the war, the NSSMC has been constantly negotiating with its international counterparts, including regulators around the world, on the admission of Ukrainian securities to European markets and other developed financial markets. Each market has its own rules, and because of this the terms may be different. But the NSSMC is doing its best to make it happen as soon as possible.
An important component of this process is the establishment of correspondent relations between Ukrainian and foreign central depositories. Establishing such relations will allow free placement of domestic securities abroad and foreign securities in Ukraine.
About UCITS, NPF and funds for reconstruction
– Representatives of the NSSMC have already stated the need to direct the capital of collective investment institutions (UCITS) and private pension funds (NPF) to rebuild the country. How will this happen?
– At present, the issue of economic security of the country is quite relevant. We are working closely with other public authorities to achieve this. The purpose of such processes should be not only to direct capital to the reconstruction of Ukraine, but also its efficient and appropriate use. When a number of urgent issues are resolved, all necessary measures will be taken to revive the functioning of Ukraine’s capital markets. We are all very interested in this.
– But where will UCITS and NPF funds be invested in the first place, so that they pay off enough to return them to investors? Individuals invest money in pension funds, and the bitter experience with the joint pension system is well known.
– Directions of investment are specified in the investment declaration of UCITS and NPF taking into account the restrictions provided by the current legislation. The efficiency of investments, of course, is determined by economic conditions, as well as the experience of the asset management company, which is a professional participant in the capital markets.
I believe that the determining factors in choosing an industry for investment will be: the availability of production assets and qualified personnel, tax benefits, consumer demand for products in the industry and more. I can’t name the industry directly, because it can be perceived by the market as investment advice.
First of all, any financial market needs to adapt to new business conditions and possibly reengineer certain processes. These actions require time and, in particular, balance both on the part of professional participants in the capital markets and on the part of the regulator itself.
It is important that not all operations in the capital markets have been suspended to date. For example, there are no restrictions on investing in military bonds. The regulator also makes local resolutions to resume the activities of companies, constant decisions on the convenience and efficiency of market participants during martial law.
The current market bans will be gradually relaxed in parallel with the stabilization of the situation in the country, until their complete abolition.
About new investment instruments
– Are the NSSMC considering new investment instruments for individuals and companies (following the example of the same military local loan bonds to finance the army)?
– Yes, we are constantly looking for new financial instruments and mechanisms that will ensure the recovery and sustainable development of the domestic economy. For example, the prospects of raising funds through municipal and infrastructure bonds were recently discussed with colleagues.
– That is, it is said that such cities as Kharkiv, Mariupol and others affected by the war will be able to issue targeted bonds to raise funds for reconstruction?
– So. And not only these cities, but also others where the resolution on release will be made.
We are also often approached by market participants with proposals to adapt financial instruments that have a positive international experience. We take into account and process all these proposals. I am confident that in the future we will be able to offer investors reliable financial instruments for investing.
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