Veronika Rief: Let us take a look at the Austrian capital market first. What are the current tendencies and trends at the Vienna Stock Exchange?
Michael Buhl: The Vienna Stock Exchange, located in the heart of Europe, has obviously been suffering from the global situation. As is usually the case with smaller exchanges, they are affected more heavily: if the market goes down, we usually experience a stronger downturn, and once the market moves up, we lag a little behind. In general we have seen a slightly negative ATX performance in 2011, but over the last two months we were up 16%, pretty similar to our CEE markets.
Meanwhile sentiment in the market has turned for the positive. Unfortunately this is not reflected by the volumes, as we are still trading at rates of some 16% below those of last year. Currently, we are trading around EUR 3.8 billion per month, which falls short of last year’s results. In terms of the number of transactions traded, we see a slight minus of about 6%.
VR: What is behind the modest trading volumes on the Austrian equity market?
MB: On our road shows – we have been to London and Paris in the past weeks – we have noticed a very high interest in our market. Unfortunately, this is not necessarily reflected in the order books. Investors still stay side-lined and wait for clear market trends. All the big funds keep large amounts of money either in cash or bonds. And the banks rather park any additional liquidity with the ECB as a safeguard for their balance sheets than directing it into the equity market.
VR: Are there any candidates for new listings among Austrian companies? Do you see any IPOs coming up?
MB: We do have a pretty well-filled IPO pipeline for the next couple of years. Some of them have been known to us for a while, others are new. As the Austrian Private Equity and Venture Capital Association (AVCO) recently stated, there are a couple of companies to come to the market over the next two to three years. But given that markets are still pretty shaky, I would rather expect them in the second half-year 2012, depending on the availability of IPO windows.
VR: Will they all choose the Vienna Stock Exchange? This leads us straight to the question of how much competition there is from Frankfurt and Warsaw.
MB: Although international investment banks tend to promote other markets as well, we strongly believe in the home market principle. Austrian companies, even the bigger ones, would still be mid caps or even small caps in comparison with Siemens, Nokia and the like. But particularly if most of their market and production is in Austria, they are usually best off by listing at the local market. This goes along with local research providers, local banks as market makers, local media and, of course, local gossip.
Austria is, by all means, an open and global market place. Around 70% of our trading volumes are attributable to remote members from outside Austria. This includes big names such as UniCredit, who trade into our market out of London or Frankfurt and thus will cover the Austrian newcomers.
At the same time, if a company decides to go for a listing at AIM or in Frankfurt, it will end up as the number 365-something, meaning that it will not get the necessary coverage. As most of the IPO candidates are aware of this difference, I would expect most of them to opt for our market.
The advantage of a smaller market place such as Vienna over the bigger stock exchanges also lies in the service we provide already in the pre-IPO phase and the subsequent promotional support.
VR: You also represent the CEE Stock Exchange Group as its CEO. How is it currently developing? Are there any plans for additional investments?
MB: Of course we are always interested in potential enlargement. However, this largely depends on valuation. Take our region: out of the combined market capitalisation slightly over 40% come from within the CEE Stock Exchange Group – namely Vienna, Budapest, Prague and Ljubljana – another approx. 40% are listed on the Warsaw Stock Exchange, whereas only some 16 – 17% originate at the remaining exchanges. This comes in even more dramatically if we talk about trading volumes: almost 50% take place within the CEE Stock Exchange Group and around 48% at the Warsaw Stock Exchange.
This means that there is almost no trading volume left for other exchanges, therefore we have to be very cautious with regard to valuation. We are ready to invest, but only at the right levels and if we have the opportunity to buy a majority.
By that I mean not only the stock exchange but also market infrastructure as such. If you do not have a grip on the post-trading environment, it is very hard to transform a market into a more internationally attractive exchange place. We have experienced that in Ljubljana for instance, where, although we had acquired the majority, we do not have any impact on the central depositary, the KDD.
VR: What is the current status of developing the CCP Austria?
MB: In July 2012 we will implement a new system called NewClear, a state-of-the-art trading system, which is going to replace the SIX system we currently use for clearing. The CCP Austria is supposed to develop into a regional central counterparty platform for Central and Eastern Europe. Following its introduction in Austria and the Czech Republic, it remains to be seen which other countries will participate in the future.
NewClear will be implemented also in Prague, where we currently are preparing the implementation of XETRA. The plan is to go live with both systems in Prague at the same time, namely in the fourth quarter of 2012. Investors will be able to use identical systems for trading and post trading both in Vienna and Prague.
The stock market in Prague has been working without a CCP, on a gross clearing basis so to speak. Since local market participants obviously want to keep this setting, we will leave it in place for domestic users. But for international remote members whom we expect to come in we need to offer a modern clearing infrastructure, which will now be granted through NewClear.
VR: Prague Stock Exchange has recently signed a memorandum of understanding with X-clear. Does that mean that there will be two systems operating at the same time?
MB: Yes, we will have two different clearing possibilities in Prague: one will be X-clear, which is part of the SIX Group, and the other the CCP-A, which is part of the Vienna Stock Exchange Group. We started the process with X-clear because we needed the infrastructure in place once we go live with XETRA. It is known as a system that is very adaptive regarding existing standards. It remains to be seen which system will be used more frequently, but we deliberately practice the opposite to Ljubljana with its restrictions.
VR: Is it already clear which trading system will be picked in Budapest?
MB: A consultation group made up of the most active market participants under moderation of the Vienna and Budapest stock exchanges is currently trying to find the best solution and optimal set-up for the existing conditions. Of course there will be some impact if we open up and new international remote members will appear but there seems to be no doubt that XETRA is going to be introduced. The upcoming AGM at the end of April will ultimately decide on the system. Implementation will then take until the second half of next year.
VR: Thank you very much for the interview.
Veronika Rief spoke with Mr. Buhl