Croatia's new law on capital markets due to take effect at the start of next year will bring more transparency, smoother trading and stricter supervision, according to the market regulator chief.
Croatia hopes to become an EU member around 2011.
'The law has been made in line with the European Union standards. However, the changes it brings will be tested in practice and it will certainly take some time before it gets fully rooted,' Ante Samodol, head of the Agency for Supervision of Financial Services (HANFA) said.
Samodol also played down market and media speculation about bourse consolidation in the Balkan region to boost liquidity and attractiveness for foreign investors.
'I don't think owners of the Zagreb bourse are interested in that amid so many illiquid shares on the regional markets. Also, such move would have made sense before a new OMX trading platform, not compatible with others in the region, had been bought,' he said.
Samodol said the changes should increase competition among brokerages and provide more security for market participants.
Besides the Zagreb bourse, trading in equities will be possible through a 'multilateral trading facility' and over-the-counter markets.
Another major change is the establishment of a fund to protect investors which will ensure investments worth up to 150,000 kuna (20,070 Euros).
'Also, we will be stricter in treating actions by those who may have insider information, while analysts and journalists will have to make clear if they have an interest in a stock they cover. Issuers will have to follow clear rules in financial reporting and communication with the market,' Samodol said.
There are some 240 companies currently listed on the Zagreb bourse, but only a dozen satisfy conditions for the top tier thus making liquidity relatively low.
'Some firms, now listed in a less-transparent 'public companies tier', will probably be delisted,' Samodol said.
He said that the law introduces capital adequacy regulation for brokerages which are not part of the banks. 'During 2009 we must make sure that only those market players which satisfy capital adequacy requirement remain on the market.
It will help that the fund for protection of investors be put into practice from the beginning of 2010,' Samodol said.
Croatia's capital market grew some 60 per cent in the previous two years, but it came to a slump this year following turbulence on the global financial markets.
Zagreb's bourse Crobex index stood at 3,602 points on Tuesday, considerably down from a life-high of 5,449 points last October.
'The fortunate thing is that our market had a generic growth, not based on securitisation or derivatives, and the slump is a reflection from the global markets. But we need more local shares with higher capitalisation and transparency to satisfy portfolio investors' needs,' Samodol said.
However, he said that introduction of the new financial instruments, like securitisation and derivatives, would not wait for too long and that market-makers are likely to appear soon. 'We're ready to approve a regulation related to market-makers as soon as the (Zagreb) bourse submits them.
However, it is easier to get market-makers when the market goes up than now after this year's slide,' Samodol said.
(source www.croatiantimes.com) | 
