In analyzing the current situation in world financial markets, analysts from the ‘Sokrat’ Investment Group hold a moderately optimistic forecast, highlighting a number of fundamental factors that warrant the long-term growth of the Ukrainian stock market. Above all are the positive trend regarding GDP growth, increasing world metal prices, a substantial increase in the order basked for domestic machinery producers, the expected privatization of energy companies, as well as an additional injection into the country’s economy due to Euro 2012. With the stabilization of the situation on credit markets and the global environment, interest in investing in emerging markets began to rise, opening additional opportunities for Ukraine's to compensate for a decline in the first half of the year. This will also contribute to a number of internal growth factors - increasing interest in securities investment, the development of collective investment institutions, as well as improving market infrastructure – the introduction of market applications, lower transaction costs and the creation of alternative trading platforms.
According to Alexander Smaliy, the Deputy Chairman of the JSC “Sokrat FC”, existing market trends are positive in the development of Ukrainian investment companies. This year, the ‘Sokrat’ Investment Group is providing new market activities – securities management and private banking – which will increase the range of investment services provided by Sokrat’s Ukrainian and foreign clients. Today, the ‘Sokrat’ Investment Group, as one of the most experienced participants in the Ukrainian stock market, has been successful in the field of securities trading, securities Custodian services, as well as asset management. At the end of 2007, the JSC ‘Sokrat’ Financial Company ranked third in terms of the sale of shares on the PFTS. The volume of transactions in equities, where the company was one of the parties to the agreement during the past year, exceeded UAH 1.63 bln. In 1Q2008, PARD ranked the JSC ‘Sokrat” Financial Company among the top three securities Custodians in Ukraine. The total number of accounting operations conducted by the Custodian of the first quarter of 2008 totaled 9.6 thousand, which is more than 50% of the company’s total transactions in 2007 (there were 18.8 thousand operations in total). In the first five months of 2008, “Sokrat’ Asset Management Company Ltd. was the leader in the volume of funds raised, amounting to UAH 107.96 million according to the Investfunds informational resource . ‘Sokrat’ Funds have the best ratios of return and risk, just as ‘Sokrat’ was the first among Ukraine’s asset management companies to have initiated the creation of industry-oriented funds.
The company plans to offer clients new types of products and services within the scope of its areas of business. In May 2008, the ‘Sokrat’ FC – part of the ‘Sokrat’ Investment Group – obtained a license from the State Commission on Securities and Stock Market (SSMSC) of Ukraine for securities management. This license allows ‘Sokrat’ to manage the assets of client who have invested them in securities on the stock market (in other words, to carry out trust-based asset management). One of the company’s strategic priorities is investing in the markets of developing countries, and particularly in the CIS. To this end, the company plans to expand its presence not only in Ukraine but also in neighboring countries. In May, ‘Sokrat’ founded ‘Sokrat Asia’ in Tashkent (Uzbekistan), which will be licensed to engage in brokerage activities (securities trading) within the month. In the next six months, the group plans to open offices in five countries. In partnership with Global M & A, ‘Sokrat’ has a number of projects in the area of mergers and acquisitions. According to our experts, some of the most attractive sectors of Ukraine’s economy to foreign investors include banking, insurance, pharmaceutical, agro-business, and retail sectors. Currently, the group takes part in tenders to arrange IPOs for Ukrainian companies, together with international investment banks on the world's leading stock exchanges. ‘Sokrat’ is an IPO-partner of the Warsaw Stock Exchange and a partner of the Vienna Stock Exchange. According to experts, the volume of public securities offers from Ukraine in 2007 amounted to less than 1% of GDP, while this figure is approximately 1.8% in Russia and 5.7% in Kazakhstan. This confirms the growth potential of the Ukrainian market.
In the sphere of asset management, ‘Sokrat’ is among Ukraine’s top three asset management companies operating in the non-venture funds sector. The total value of assets under management as of June 1, 2008 exceeded USD 280 million. In 2008, ‘Sokrat’ Asset Management plans to expand its range of investment funds. The company plans to create a new public fund, whose assets will be invested mainly in fixed income instruments (corporate, government and municipal bonds), as well as deposits. This strategy will be the most conservative, in line with the “Premium” mutual funds family. It will allow investors to invest their money successfully, even in times of market correction. Also, this year the company plans to propose a strategy of investing in the securities of stocks of small and medium capitalization. As the company experts suppose, the best model for this strategy will be a closed corporate non-diversified investment fund, which will considered as potential investment options, not only for stocks represented on the PFTS, but also potentially profitable shares in companies that have not yet been included in official listings. In order to promote the collective investment institutions and improve financial capabilities, the company plans to offer existing and potential investors the opportunity to participate in their investment portfolio remotely (from a distance).
“Experience shows that today there is great interest on the part of institutional investors in the professional management of available funds and that the stock market is regarded as one of the most attractive areas for investment,” stated Gregory Ovcharenko, the Director-General of ‘Sokrat’. “Awarding great attention to building the best infrastructure for working with insurance companies, non-state funds and large private investors, in the short-term, we are planning the establishment of a fund flexible to accommodate a particular investor”.
This year, ‘Sokrat’ set up the non-state pension fund “Sokrat-Future”. By the end of 2008, Sokrat proposes to attract up to 3,000 individuals, as well as by 10 legal entities, to this fund, with the employers’ contributions paid into this private pension fund totaling as much as USD 1 million.
The company also plans to launch the “Premium Pre-IPO Fund” in September of this year and to develop its activities with respect to international funds.
The ‘Sokrat’ Asset Mangement Company is implementing collaborative projects with leading insurance companies, including “INGO Ukraine” in the prerequisite for developing market infrastructure is the establishment of an institution for professional financial advisers. Currently the ‘Sokrat’ Group has opened information centers in five Ukrainian cities, field of non-state pension security, and with the Closed Joint Stock Company “ASKA” in the area of risk insurance.
Expanding the range of products and services offered as a group and on the market on the whole, as well as developing and introducing new instruments for the stock market involves high requirements for market operators in the area of quality service. The including Odesa, Kharkiv, Dnipropetrovsk, Lviv and Donetsk. The ‘Sokrat’ regional network covers all key regions of the country and is the largest amongst Ukrainian investment companies. The company also plans to open additional information centers in other regions of Ukraine.
The active development of the ‘Sokrat’ Investment Group provides for the systematic management of business processes. For example, earlier this year ‘Socrates’ implemented the first phase in automating its management system and financial accounting activities. The establishment of a single information system is a unique project in Ukraine in terms of automating financial management systems using “1C: Enterprise” version 8.1. The first phase of this project resulted in the implementation of an innovative solution – the inclusion and automation of such business processes as front-office, middle-office, back-office, underwriting, merchant services and custodian in a single management system. This allows for real-time communication with the software of the PFTS and international financial systems and for building accountability for SSMSC in order to provide clients with current information on transactions and quotations. The second phase of this project will cover the budgeting process, build management accounting and reporting, accounting, tax, personnel records, as well as the transformation of accounting under IFRS, in addition to the consolidation of reporting on groups of companies on the whole. In 2008, the ‘Sokrat’ Investment Group underwent rebranding, which was necessary due to the need for a long-term strategy for the company. The reputation that this Group worked years to achieve is an important asset and the basis for the brand’s further development. Reflecting its wide-ranging strategic plans, the ‘Sokrat’ brand has become more modern and dynamic, while maintaining respectability, responsibility and tradition.