CAPITAL MARKET EXPECTS INSTITUTIONAL INVESTORS
Institutional investors in Bulgaria will be exercising an increasing influence on the capital market as their assets grow. At present, pension funds, insurance companies, mutual funds, and investment companies have collected a resource of BGN1.9BN-plus, Stoyan Toshev, Chairman of the Association of Management Companies, said during the Bulgarian Business Days forum, organized with the media support of the BANKER weekly. That money could prove to be an invigorating dose of adrenaline to the capital market. The increase of the aggregate assets of institutional investors is a tendency that will persist in the future as well. In 2005 alone they registered a 30% growth from 2004. It is best expressed in mutual funds where more than BGN130MN was gathered, marking a 43% growth from the beginning of this year and a 250% growth from 2004.
Pension funds have generated BGN1.1BN plus and received in February a greater freedom to invest in shares. The restriction is already up to 20% of the collected money instead of 10% earlier. In 2005 a total of BGN250MN, or some 27% of the pension funds assets, was invested in stocks. With the new freedom that percentage can grow even higher, while investments in corporate paper may leap to at least BGN400MN. Mutual funds invested in the capital market about 70% of the gathered BGN130MN. Concurrently with the increase of institutional investors' assets the turnover of the BSE-Sofia picked up, too. Securities worth BGN3.182BN-plus were traded on its floor in 2005, and in April 2006 its capitalization reached BGN9.616BN.
The increase of institutional investors' assets will be also one of the reasons for the first IPOs on the capital market by the year-end. For most of the corporate managers, however, it is still unacceptable to go public, Radoslav Zhelyazov, Director of BSE-Sofia's Issuers and Membership department, said during the forum. Over the last four years (2002 to 2005) just a few companies went public - United Bulgarian Bank (UBB) and the municipalities of Sliven and Doupnitsa (through an issue of bonds), while Investor.bg, Interlogic - Real Estates, Interlogic-Leasing, Web Media Group, and Stergan Aquafarms Bulgaria listed their paper for trade on the exchange. In 2003 and 2005 Bitex and Transcart made on the official market something like an IPO.
The amendments to the Public Offering of Securities Act gave an opportunity for a new kind of a public offering by acquiring rights for listing on the exchange when the capital is increased. 654 deals for acquiring rights for listing on the exchange of special investment companies have been closed since 2004 by using the primary capital market. Through these deals investors acquired 6,750,150 rights and have shares worth BGN6MN-plus, Mr. Zhelyazov pointed out.
The process of listing a company on the exchange is long and expensive. According to Mr. Zhelyazov, the minimum price is about BGN10,000, while the maximum one is some BGN37,000. That amount includes the drafting of the prospect for public offering, the fees for the Financial Supervision Commission and for the stock exchange. However, the remuneration to the director of relations with investors should be added, which is at least BGN1,000/month. Therefore, it is still too early to expect IPOs of medium-sized enterprises on the exchange.
There are good perspectives for the public companies as there is a huge money resource and an increasing interest on the part of commercial banks and other institutional investors can be noticed recently. The expectations are for a considerable increase of the number of individual investors and a growing integration with the European markets, which would mean that the Bulgarian companies will get a chance for financing from abroad.