Whatever causes the growth of the internal state loan bonds, it makes us think that money does not go to the real sector of the national economy. Everything that the monetary policy of the National Bank and the Ministry of Finance is aimed at actually results in investments in speculative markets. This means that we do not achieve the proper results for the sustainable recovery of the economy of Ukraine. However, our ministers and legislators should not forget the Great Depression in the United States. Then in America, after a sharp drop in markets, during the year there was an increase in GDP and stock market. After that, for as many as 10 years, the country plunged into a deep recession. Yes, this must be remembered and lessons from the past must be learned.
When organizing the process of large-scale privatization and the sale of assets of the insolvent banks, we must remember that for Europe, Ukraine remains a country with one of the lowest capitalization levels of joint-stock companies. Accordingly, the growth potential is preserved in almost every stock, but there are not so many incentives of Ukrainian issuers for buying securities. And foreign investors are becoming more attentive and cautious.
I think our hopes in anticipation of a sharp rise in stock prices in the next, 2019 year are in vain as the Ukrainian stock market, apparently, is undergoing the so-called cleansing crisis, which Egypt, Malaysia, Mexico and other countries experienced in their time. In my opinion, it has become clear to all analysts and experts that it is possible to speculate a little more and play a little with government bonds. But if there is enough political will for legislators and top officials to move from games to business, then for the next few years you will have to forget about the way you can make money on the stock market with short speculative money. In exchange, the initial function of the stock market should significantly increase - attracting long investment money to the real sector of the economy.
Well, given that the stock market is driven by liquidity, do not rely on optimistic forecasts, but choose only those investments where the return is clear and not related to market movement. At the same time, the main source of investment resources with proper economic and monetary policies could be the accumulation of legal entities and individuals, which today are outside our country and outside the banking system. According to official data of the National Bank on the net investment position, their amount is more than $ 90 billion. Therefore, the main tasks for the Cabinet of Ministers should be, firstly, to restore the confidence of market participants to state regulators, as well as to banks and non-bank financial institutions; secondly, the development of national capital markets as an effective institution for attracting long-term investment resources for sustainable economic growth.
To do this, first of all, before the end of 2018, we need to adopt the draft law No. 9035 “On capital markets”. Starting in January 2019, we should launch the derivatives market. But now we can conduct preparatory work on the release of at least options (standard sales contracts). They can be grouped, classified, standardized, and so on. And it is high time to at least begin to develop a procedure for issuing options for the purchase of problem assets of commercial banks, namely, pledged property. What will be the price of the underlying asset and the price of the right to purchase it the market will determine. The difficulties lie not in the technical possibilities of issuing options, but in order of estimating the value of problem assets. In this order, the use of derivative securities is just not provided. Moreover, amendments and additions to the normative act cannot be made, since the draft law “On capital markets” has not yet been adopted in the Verkhovna Rada. Therefore, the main thing is the law!
In general, it is possible to define three strategic directions for reforming the stock market of Ukraine in the interests of investors. First, the improvement of the securities market mechanisms for the redistribution of investment resources between institutional investors and the real economy. For this it is necessary: a) to increase the efficiency of the exchange market and depository clearing institutions; b) to launch the derivatives market as soon as possible. Secondly, the completion of the pension system reform. In particular: a) from January 1, 2019 introduce the cumulative level of the pension system of Ukraine; b) organize a system of non-state pension provision at enterprises of natural monopolies. Thirdly, the harmonization of the market entities taxation system.
But entrepreneurs are still wondering what taxes will be imposed until the end of next 2019 year? Almost everyone considers the investment horizon only until mid-2019, and this is an alarming signal for business: the rules of the game may change at any time. So on October 31, the president at a meeting with the business once again stated that he would seek to replace the income tax with a tax on the withdrawn capital (by the way, Presidential draft law No. 8557 on the tax on withdrawn capital is already registered in the Verkhovna Rada).
So what? Most legislators do not support the presidential initiative. And analysts of the IMF and the World Bank warn the Cabinet of Ministers against budget losses after the introduction of a tax on the withdrawn capital. Finally, our Ministry of Finance believes that the tax system is not a way to stimulate the economy. Isn't it the problem? In this regard, I propose to look at the example of Kazakhstan. What did they start with, introducing a new economic policy of industrialization and a new investment strategy? Was it the replacement of one tax by another or the purchase of new machines? No, neither one nor the other, they began with a radical reduction in the tax burden for production and for the market. They launched a new tax policy.
So we need to develop and adopt the National Program for the Financial Market Integrated Reform and, above all, to prepare:
- Investment Code of Ukraine;
- Strategic program for creating a derivatives market in Ukraine;
- The concept of public domestic debt management;
- The national strategy for the restructuring of problem assets with their securitization;
- The concept of creating a unified information base of issuers of securities and ensuring free access for investors;
- Strategy for the derivatives market development in Ukraine.
We do not yet have quick recipes for the comprehensive and systematic implementation of such reforms. But this does not mean that today these problems do not have to be solved, and especially do not have to be discussed.
Read original article at 112.ua