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Many of my colleagues have a rather pessimistic view of the Ukrainian stock market fate, which still lives its hard life, not related to the volatility in the world capital markets. And although local stock indices sometimes show record levels, however, the volumes of transactions and exchange contracts continue to be too small, and various risks, on the contrary, increase. And for a year now the Ukrainian stock market remains too narrow and cheap.
Why is this happening? In the opinion of most traders and analysts, it’s because our national stock market requires serious and large-scale improvement at the legislative level, and it differs from developed markets by the lack of modern technological capabilities. With the help of the rules of exchange trades, adopted back in the late 90s of the last century, and the old technological solutions, we can not in any way earn competitive advantages in the fierce struggle for investors and major players in the capital markets. Our top officials and people's deputies are talking about improvement, but in fact, they do not want to take the American stock market as a benchmark, which in March of the current year (2018) marked the 9th anniversary of the "bullish" trend. True, individual corrections gave the right to experts and analysts to assert that this market is already overheated.
And yet, for officials and specialists in this field of activity who built the securities market in Ukraine on the basis of the Anglo-Saxon model of law (for the first time in 1994 I graduated from specialized stock exchange courses in Washington, visiting one of the major US stock exchanges NASDAQ), it is important to understand the reasons for such a prolonged growth of the American market and from this to learn instructive lessons. So, the main reasons for such positive dynamics in America are most probably the US GDP growth and tax benefits, as well as President Donald Trump's purposeful protection of the interests of national producers. Plus, the ongoing process of raising the base interest rate of the US Federal Reserve system invariably correlates with the growth of the stock market, and it is no coincidence, as the American economy accelerates (the Economist also writes on this topic, recalling that Trump in the election promised a growth rate at the level of 4%).
But why do not we monitor the trends of external stock indices for the organization of successful work of local exchanges and the Ukrainian market as a whole? How much does Ukraine's budget lose from failing to reform the national securities market and collective investment, from the constant postponement of the launch of the pension savings system? After all, according to the estimates of various experts and analysts, the total amount of losses is annually up to UAH 70-80 billion. We also need and are able to increase trading volumes in national regulated markets by at least 100 times by raising money in the domestic collective investment market. However, until now, the people's deputies have not adopted two fundamental draft laws: "On Capital Markets and Regulated Markets" and "On Currency".
All this gives grounds to think that with these government the hryvnia will not be stabilized for a long time, which means that only for this one reason, without taking into account other factors, the Ukrainian stock market will continue to remain cheap while maintaining a certain dividend yield, although already its liquidity has quite significantly decreased. But if ministers and legislators got acquainted with the trends of the US market, we would understand that even a small influx of investment money into our stock market could have a rather positive impact on the quotations of securities of Ukrainian issuers, thus raising the capitalization of our enterprises and companies.
Again, we have to repeat the same questions: why, following the example of our Western partners, we do not develop the National Program for Capital Market Reform in Ukraine, why we do not implement the Strategy for the Creation of a Unified Information Database of Securities Issuers with free access to investors, have not started to develop the concept of establishing a state fund for compensation interest rates on loans granted to priority sectors of the economy? What is holding back the Cabinet of Ministers and the Verkhovna Rada from introducing tax incentives for Ukrainian business? But in America, President Donald Trump is firm and consistent in his promises, respectively, and further, we can expect the growth of US GDP and the US stock market. For example, only due to tax incentives their corporations and companies will receive additional profits in total from $300 to $400 billion.
National Program for Reforming the Ukrainian Securities Market and Collective Investments should enter the first ten national priorities because it’s based on the American experience. And it is high time for the Cabinet of Ministers and legislators to see key problems beyond the horizons of their own state so that not only the leaders of the EU and the US but also representatives of the International Monetary Fund understand this. Then I admit, the indices of our stock exchanges can show growth in 2018 as well. And this story can continue, as Deputy Head of the National Bank Dmytro Sologub stated on April 12 of this year during his press conference: "We expect additional placement of Eurobonds next year. We expect the placement of bonds for 4 billion dollars in 2018-2019: 2,5 billion this year and 1.5 billion – in the next year. "
In the meantime, unfortunately, the structural imbalance in the Ukrainian economy, which can be called differently (imbalances in a balance of payments, high debt leverage, etc.), has not gone anywhere in recent years. But it is encouraging that the National Commission on Securities and the Stock Market finally presented the Concept of Changes for Capital Markets in April 2018, and also resumes the practice of the Committee on Corporate Governance and Development of Stock Market Tools to discuss draft regulatory and legal issues acts.
Now it is a situation where only investment type of the rise of the Ukrainian economy can cope with the fulfillment of the priority tasks, namely: to ensure a stable and dynamic growth of Ukraine's GDP. And to ensure this, the trade, including exchange transactions on the securities market, should become one of the most accessible and effective tools for economic recovery.