Alongside corporate securities, as of 1 November the Bulgarian Stock Exchange is also offering government securities. This, theoretically key player on the financial markets and in the national economy as such, has not, as yet, been able to assert itself as the place where company assets are assessed most accurately, where capital can be raised in the most transparent way and at the fairest price, where investments can be made in company, municipal or corporate securities – bonds and shares and their derivatives.

There are at least two reasons for this – Bulgarian businesses are not sufficiently developed, as yet, for there to be a need of a stock exchange, whereas the exchange itself is too small and occupies a peripheral place in the world of business in Bulgaria. And it is precisely for this reason that its market capitalisation is just over 4 billion euro, which is hundreds of times below the market value of just one world company such as Google or Apple, for example.

Trading in government bonds just may give a boost to the dodderingBulgarian capital market. 2.8 billion euro in 20 emissions of government bonds are now at the disposal of investors – local or foreign.

Anywhere in the world government debts are what interest investors most, because they are safe, lucrative and with a high degree of liquidity – i.e. they can be bought and sold quickly and easily. Their profitability is guaranteed by the state, the interest rate is good, and they have now become attractive for traditional customers as well, like banks pension funds and insurers, as well as for smaller and even individual investors. Because the smallest admissible investment is 1,000 euro, a sum that even the man in the street can afford. The assumption is that with the current practice of zero or even negative interest on bank deposits, securities on the capital market will attract the attention of quite a few people in the country. And not just in the country, because the expectations of the Bulgarian Stock Exchange management are that they will be able to attract institutional and individual investors from abroad. At least as many as there were prior to the financial crisis of the late 2010s, when they accounted for 60-65 percent of the market. Now, their share is three times smaller. In fact, this drop also affects foreign direct investments in the country, which have gone down 8-9 times compared to the record highs before the world financial crisis. The Bulgarian economy is in desperate need of fresh money, as it is now in its ascendancy and with business-expansion projects, whereas Bulgarian national capital remains more than modest in terms of volume and potential.

As a matter of fact a smoothly functioning and high liquidity capital market is something everyone needs, including the stock exchange itself. It reopened after the end of communism more than 25 years ago and there were a number of financial experts with expertise from the world stock exchanges who were really enthusiastic and eager to transfer the good practices from Wall Street, London and Frankfurt to Sofia. Alas, the Sofia Stock Exchange never really took off, as it appeared right in the middle of the dramatic baking crisis of the mid-1990s. Without banks and without their financial resource, there can be no question of any serious stock exchange trading. The crisis came and went, many people lost their money in the collapse of the banks, yet the fear of investing in securities, whatever that is, remains. All the more so that the state, which actually owns the Bulgarian Scotch Exchange, did not and does not give any guarantees that investing in securities and bonds is safe or profitable. To many this looks like a financial bubble, a suspicion that is now chronic. It is precisely for this reason that companies are not willing to offer their stocks on the stock market and become public limited companies, nor are financial institutions or individual investors inclined to come out on the stock market. Thus the number of deals concluded a day is more than modest and when the volume of trading happens to exceed 1 million euro, this is cause for universal celebration. Now, we are expecting things to change. All the more so that the stock exchange is promising that no fees will be levied on deals in government bonds for at least another year. This logically gives rise to the question – seeing as the exchange embodies the market and its laws, why then must the state intervene so as to make things right, there are even plans to make shares of profit-making state run companies available on the stock exchange. That is how it is anywhere in the world, many experts will say. That is how it is, the state gives the head start and then waits for businesses to screw up the courage to follow suit.

We can only hope that this will happen in Bulgaria. Admittedly, the moment for this is just right – the economy is rolling full steam ahead, businesses are growing, as are the incomes of the public, i.e. there is money for investments in the stock market, until recently totally neglected. It now remains for the “bears” and the “bulls” (the dealers who stake on the stocks heading down or up) to take things into their own hands so as, at long last, to get the capital market in the country rolling.

English version: Milena Daynova