Advance Praise for New Stock Exchange Market NEWEX

ZEW conducted a survey on the expectations for the upcoming inauguration of the "New Europe Exchange" (NEWEX).

The "New Europe Exchange" (NEWEX) will start off successfully according to the majority of the 231 financial experts surveyed by the Centre for European Economic Research (ZEW), Mannheim, on the upcoming launch of the new stock exchange. Besides the positive outlook for NEWEX, experts expect national Eastern European stock markets to benefit from the launch of the new stock exchange.

In autumn, NEWEX will be launched as a joint project by the German Stock Market (Deutsche Börse AG) and the Austrian Stock Market (Wiener Börse) in Vienna. Stocks and other securities, such as "American Depositary Receipts" (ADR) of Eastern European businesses, will be traded at the new stock exchange.

At the end of 1999, the market capitalisation of all Eastern European stock markets was about USD 35 billion corresponding to 0.1 per cent of total global market capitalisation of stocks. Most Eastern European stock markets are also very small in relation to their respective gross domestic product and still at an early stage of development. NEWEX could thus be a serious threat to Eastern European stock markets.

However, the financial experts surveyed by ZEW think otherwise: at least 71 per cent of the experts expect an increase in trading volume on Eastern European stock markets despite NEWEX. This could be due to the fact that NEWEX may increase the worldwide interest in Eastern European stocks, which would benefit local stock markets.

Financial experts also expect a significant increase on the supply side: almost 75 per cent predict a considerable increase in listed Eastern European companies. This is most likely to improve the provision of equity capital to Eastern European companies at least in the medium term.

Stocks of Eastern European companies are currently traded in numerous international stock markets, including London, New York, Frankfurt, Berlin, and Vienna. NEWEX is likely to turn into a significant competitor to these stock markets. According to 66 per cent of the surveyed financial experts, NEWEX could attract a large part of this international trade.

Contact

Prof. Dr. Michael Schröder, Phone: +49(0)621/1235-140, E-mail: schroeder@zew.de