February. Roundtable on Capital Markets (Kyiv. Ukraine)
On 7 February 2013 ACCA organised the roundtable for members on Capital markets in emerging and frontier economies. The event took place in the Blue Conference Hall at Ukrinform, Kyiv, Ukraine.
Over 40 people showed up at the event, including ACCA members, policymakers, educators, researchers and media reporters.
The roundtable was built around ACCA’s recent topical report The rise of capital markets in emerging and frontier economies, shedding light onto local practices of capital market development in a range of countries with emerging and frontier economies. The event was organised as a platform for discussion in order to get Ukrainian perspective on capital market development from key representatives of business, international organisations, policymakers, researchers, academic institutions and economists.
Alex Kutsenko, Regional Officer for Eurasia, USAID Partners for Financial Stability, presented his personal view that Ukrainian capital market does not seek financial disclosure. He argued that disclosure is not supported by market model, owed to mass privatisation in 1990s and weakly supported by regulators, struggling to implement global standards. Disclosure is not demanded by investors, who merely seek financial rewards, and not visibly looked for by issuers, who received funds anyway. Finally, disclosure does not help with decision making. According to Alex, the solution for enhancing capital market would be expansion of financial literacy.
Yaroslav Golovko, President of Kyiv Business School, presented educator’s point of view regarding lack of qualified professionals in the area of investment business, needed for long-term sustainable development of capital markets. Yaroslav mentioned that investment business specialists should have internationally recognised qualifications, like ACCA. He also shared positive experience of incorporating ACCA material into own syllabus. Additionally, business and education should cooperate in terms of internships, scholarships and other initiatives.
Vitaliy Kravchuk, Senior Research Fellow at the Institute for Economic Research and Policy Consulting, presented the macroeconomic perspective for capital market development in Ukraine. While growth of capital markets probably won’t drive itself the GDP growth, it may produce positive infrastructure for Ukrainian economy. Some hints for developing effective capital market in Ukraine would be to reduce banking interest rates, improve pension system, develop the market of government securities and adopt proper financial disclosure.
Valentyn Glubokyy, PhD in Economic Science, Docent of Banking faculty at Kyiv National Trade Economic University and Director of Consulting Group “Feodal”, presented the concept of economic capital for firms as a tool for aligning interests of stakeholders, including shareholders, creditors, management and regulators. Transparency is the basis for this process. Valentyn showed examples of modern risk management as ways to implement the concept of economic capital – Basel III, Solvency II Directive 2009/138/EC, COSO ERM model.
Andrey Tertychnyy, Partner and Lead consultant of Consulting Group “Feodal”, continued the ideas of his colleague, arguing that risks post 2008 economic crisis resulted in high volatility of developed and even higher volatility of developing capital markets. Companies that will learn first how to work on high volatile markets will have competitive advantage.
Henning Drager, Director of Sustainability, BDO Ukraine, spoke about sustainability on the capital markets, urging ACCA members to take active part in changing current practices. Henning pointed out that current capital market model does not include social and environmental externalities into valuations. Capital sustainability should be allocated through financial markets. Incentives behaviour should change in line with sustainable economy.
ACCA members provided their views on key results of ACCA research. Financial disclosure is important, but some required by IFRS is exaggerated and can be put to zero by speculative behaviour of investors. Consequences of lack or surplus of liquidity can cause the markets to implode or explode, but surplus of funds can make the market more efficient in Ukraine. Currently Ukrainian capital markets have bad reputation due to unclear rules of the game and logic. Transparency and fairness in change of ownership is desired for formerly state owned enterprises. Capital market learning experience is very important, education is a must for effective capital markets, however a change in mentality should take place. Members would also like the report to represent views of regulators and discuss whether Ukrainian stock market can have a future.