The economic sector of the Republic of Serbia, including the capital market, offers a telling reflection of the global market’s challenges and some regional specifics. Despite periods of uncertainty and stagnation, Serbia’s capital market maintains signs of vitality and potential for growth.
Currently, the Belgrade Stock Exchange (BELEX) facilitates trading in stocks and bonds, with expectations for expanded offerings encompassing other debt securities, derivatives, deposit certificates, and additional financial instruments. The BELEX lists stocks from public joint stock companies, while bonds primarily originate from the Republic of Serbia, supplemented by offerings from Serbian construction company Energoprojekt Holding. The first quarter of 2024 evidenced overall trading progress, with notable increases observed in March. During this period, the BELEX15 index grew by 6.92%, while the BELEXline index saw a 7.17% surge. Notably, Messer Tehnogas emerged as the most traded stock in the past month, achieving a recorded turnover of EUR 535,184, followed by Dunav osiguranje with a turnover of EUR 267,310, and Naftna industrija Srbije taking the third place with EUR 230,657. Not good, not bad, with marks of positive development, but still far away from its full potential.
As a herald of positive change, the previous year brought important personnel transitions within the BELEX – the appointment of a new executive director. Such changes are understood as the beginning of a new chapter. Following Ivan Leposavic’s appointment as BELEX’s new CEO in 2023, he embarked on his tenure with a mandate to enhance market efficiency and allure new investors. Moreover, the personnel shifts within the Securities Commission also signal the commitment to fortifying the capital market and its integrity, as Marko Jankovic took the helm. Although every significant change requires time, the new energy that those personnel changes have brought to the market can be clearly seen.
The proactivity of the Serbian government, particularly the Ministry of Finance, is something that has to be noticed and welcomed – for the first time in years, true action could be seen. Following the recent adoption of the capital market development strategy spanning from 2021 to 2026, concerted efforts have been directed toward bolstering institutional capacities, refining regulations, and fostering participation from diverse market players. Key objectives include enhancing the investing environment, legal security, innovation, and the introduction of new financial products. By promoting the issuance of diverse bonds, including green and thematic bonds, and nurturing the growth of alternative investment funds, the strategy aims to diversify funding sources for the economy. In the sense of diversification, the National Bank of Serbia is also actively working on the draft Law on Crowdfunding, following the 2024 Action Plan for Startup Development, and it should not come as a surprise that the BELEX plays a role in it.
In line with global market trends, Serbia’s capital market has embraced corporate bonds as an alternative avenue for financing companies. In response to the COVID-19 pandemic in 2020, the government introduced incentives to strengthen the economy, including streamlined procedures for issuing corporate bonds. Although only 10 companies have issued corporate bonds, the Minister of Finance has announced plans for a substantial increase in corporate bond issuance in 2024, with support from the Republic of Serbia covering issuance costs.
To give additional incentive to capital market development, in 2023, the World Bank authorized a EUR 27.7 million loan to the Serbian government. This represents a significant impetus for Serbia’s financial sector, granting optimism for the expansion and sustainability of its capital market. Through fortifying market institutions and promoting the issuance of diverse bonds, Serbia endeavors to cultivate a more resilient and diversified financial landscape, thereby promoting economic resilience and growth.
The recent reaffirmation of Serbia’s credit rating at BB+/positive outlook by S&P Global Ratings’ and BB+/stable outlook by Fitch Ratings underscores the nation’s steadfast economic policy framework and growth indicators. This affirmation demonstrates Serbia’s resilience to external shocks – a critical element in fostering sustainable economic growth and investor confidence that is expected to be a driver for future capital market development.
To summarize, recent events within the BELEX, coupled with the World Bank’s substantial loan approval and efforts of the Serbian government, particularly the Ministry of Finance, showcase the firm commitment to developing a dynamic and resilient capital market. With strategic initiatives focused on institutional strengthening, regulatory refinement, and the promotion of diverse financial products, Serbia aims to attract investment and secure economic growth, promising a brighter economic future for the capital market and its entire economy.
By Sava Pavlovic, Partner, Zivkovic Samardzic Law Office
This article was originally published in Issue 11.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
