Portyanova O.V., Vlasenko M.O., Mudrenko A.A.
Oles Honchar Dnipropetrovsk National University, Ukraine
EQUITY MARKET OF UKRAINE
An equity market is a distinct segment of a financial market, where relationships are established in regard to purchase and sale of special documents (securities) that have their value, circulate freely and indicate relations of the co-ownership, loan and derivatives of them between those who attract resources issuing securities (issuers) and those who buy them (investors). The process is conducted mediately; i. e. specific businesses provide a service by acting as financial intermediaries.
A stock market is a multifaceted kind of the economic system, with the help of which the economy operates as a whole. It promotes the accumulation of capital for investment in productive and non-productive areas, the structural transformation of the economy, its restructuring, positive dynamics of the social structure and everyone’s welfare by means of securities free disposal.
The securities are monetary documents which verify ownership or loan relationships, determine the relationship between a person who issued them, their owners and provide capital gains distribution in the form of dividends or interest and an opportunity to transfer money and other rights arising from these documents to other people.
In general, securities can be divided into two groups: private, which are issued by business entities and state, which are issued by the state on behalf of the Cabinet of Ministers of Ukraine, the Ministry of Finance of Ukraine and the local authorities.
The main objective of the state regulation is to reconcile the interests of all entities of a stock market by setting appropriate limits and prohibitions on their mutual relations, as well as interfering indirectly in their activities.
The state regulation of an equity market includes legislative and by-low regulations, administrative bodies which ensure direct interference into the activity of equity market entities, the government indirect intervention into the stock market.
The equity market is one of the most important components of the Ukrainian economy, which is an indicator of not only the capital market, but also the entire financial system. The current state of the equity market and its structure is formed as a result of the transformation of the economic system, which took place in Ukraine under the influence of the internal factors of its development and external ones such as the world financial crises of recent years.
Let’s consider one of the main indicators of the equity market, the index of the volume capital issue. In 2010, the total volume registered by the State Commission on Securities and Stock Exchange (SEC) securities issues amounted to 153.05 billion UAH, including:
● shares – 46.14 billion UAH;
● corporate bonds – 31.35 billion UAH;
● municipal bonds – 974.00 million UAH;
● options – 0.27 million UAH;
● investment certificates of asset management companies (AMC) of unit investment trusts – 65.37 billion UAH;
● shares of corporate investment funds – 8.89 billion UAH;
● certificates of real estate transactions – 54.5 million UAH;
● conventional mortgage bonds – 270.00 million UAH.
As shown in Fig. 1, the dynamics of capital issue is progressive. Thus, if in 2002 this value reached the level of 15.59 billion UAH, then in 2010 it almost increased tenfold and amounted to 153.05 billion UAH. Analyzing the dynamics of the volume of the capital issue in Ukraine from 2002 to 2010, which is shown in Fig. 1, it should be noted that there is a general tendency to an increase, but it has no sustainable development. It is caused by the unstable economic development of Ukraine as a whole and the stock market in particular.
The equity market in Ukraine is emerging. Owning to the rise in the volume of the capital issue, there can be observed diversification of securities. The consequence of this process is market complexity. Under international and domestic crisis in the financial system it is a positive tendency that creates the preconditions for reducing risk level of an investor’s activity, but this factor is effective for a state’s development only if the equity market operates transparently.
It is necessary to increase the state's role in a stock market to improve the equity market in Ukraine and maintain its financial security. One of the main elements of the state regulation of the equity market is to control the activities of issuers, professional market participants, exchanges and self-governing organizations, aimed at detecting and timely preventing low-breaking in the equity market.
Fig. 1 Volume of capital issue in Ukraine from 2002 to 2010
The state should create a long-term strategy to develop the equity market and it has to find ways of combining the state’s and private sector’s resources in order to create a stable and reliable market; it is vital to adopt a set of regulations as well. Thus, creating a single exchange system at the present stage of the domestic equity market development will be a powerful factor in improving its efficiency.