Frankfurt and Vienna aim to corner the market in central and eastern European share trading with the launch of the joint venture NEWEX on November 3, but face tough competition from existing bourses.
The Vienna-based NEWEX, a joint venture of the Frankfurt and Vienna exchanges, will focus exclusively on central and eastern European companies, and primarily those in economically advanced Hungary, the Czech Republic and Poland, as well as from Russia.
Russian oil giant LUkoil, Hungary's oil and gas supplier MOL, the Czech bank Ceska Sporitelna and Polish software manufacturer Softbank are all among the 89 companies initially listed on the new exchange.
"We're offering access to companies in the region in just one stop, rather than going to the individual exchanges of Budapest or Prague, and all in one currency, the euro," said NEWEX spokeswoman Christel Koch.
"Plus it's all under the roof of Austrian financial legislation, so it's both simple and safe," she added.
Twenty banks and trading houses from Germany, Britain and Austria — countries which already account for much of east European share dealing — will start trading on NEWEX when it launches.
Using the Xetra electronic trading system, which links 430 members in 17 countries, NEWEX claims that it "will close a gap in demand: The considerable need for financing in Central and Eastern Europe".
As an extra incentive, NEWEX won't be charging any fees for the first three months of trading.
But whether the new venture will lure companies from existing exchanges remains to be seen. NEWEX had hoped for "over 100" companies to be registered when it goes live, but the current list shows only 89.
In the Czech Republic for one, a number of key firms who received an offer from NEWEX are not among the initial 89 who decided to register themselves on the new exchange, including the country's electric company CEZ and Ceske Radiokommunikace.
CEZ has made clear that it is in negotiations with other exchanges.
"They may well prefer to go somewhere established over somewhere new, and there are a lot of customers in London. This will be a challenge that NEWEX faces," said Gerhard Kalchgruber, who deals in eastern European shares for Creditanstalt Investmentbank (CAIB) in Vienna.
Many central and eastern European companies are already listed on SEAQ International in London. A tranche of Cesky Telekom has already been released there, and other key players like the Hungarian oil and gas company MOL are also listed.
But Kalchgruber and other traders believe that NEWEX could offer higher quality trading than SEAQ, and so in the long run should emerge the superior bourse for trading in central and eastern European shares.
"SEAQ will have the upper hand in terms of liquidity when NEWEX launches," said Matthias Siller, a trader at Austria's Raiffeisen Zentralbank.
"But unlike other bourses, NEWEX is devoted to this market and is quite separate from the Vienna exchange," renowned for its sleepiness.
Some skeptical observers have suggested that countries like Hungary, Poland and the Czech Republic have become less interesting areas of investment due to lower profit margins as their economies stabilize and they integrate with the West. Raiffeisen's Siller disagrees.
"Obviously things have changed dramatically in recent years, but companies in these countries are still interesting. The 'new economy' is growing quickly — particularly in Poland which has a burgeoning IT sector — and the costs are still low, which makes them very attractive indeed," he said.
Companies will be listed on NEWEX in the categories NX.plus and NX.one. Companies in the first category will have a stock value of a minimum 20 million euros, those in the second a minimum of 10 million euros.
All companies are obliged to provide prospectuses in both English and German, quarterly and annual company reports and keep accounting practices in line with international standards.— (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)