"The Kyrgyz government did practically nothing to effectively use capital formation by local enterprises, via the issuing and placing of corporate bonds, while these securities have been well circulated in Kazakhstan, Russia, Ukraine and Azerbaijan."

Tendencies of the world stock market

The capitalization of the world stock market in 2005 reached the amount of 43 trillion dollars (in 1990-9.3 trillion dollars and in 2000 - 32.1 trillion dollars). The rate of capitalization is 5-6 times ahead of the GDP growth. Capitalization has been increasing mainly due to developed countries' markets, which constitute more than 90% of the world capitalization total. According to the capitalization rate, the US market is in first place, constituting 40% (50% by the end of the 1990s) of the world market capitalization. The share of the Western European markets is 31% while the Japanese market -11%. Thus, the rest of the countries or developing economies constituted only 8% of the floating world capital at the beginning of the millennia while recently it has reached 15%.

The increase in the capitalization of the world stock market is related to the structural changes in the financial market as a whole. The point is that the infrastructure of capital formation in the world economy has favored the securities market - 58% as opposed to bank lending. The picture from country to country varies depending on traditional ways of policy-making. For example, for Germany and Japan where the bank system has been conventionally favored the financial market, the ratio is 75%:25% and 80%:20% correspondingly in favor of bank lending. However, in such countries as the USA, Great Britain and France, where debt security is increasing, this ratio is 59%:41%, 27%:73% and 30%: 70% correspondingly in favor of the securities market.

The tendencies of the world stock market are related to the changes in the structure of players, which appears as follows. In the 1970s the major market investors were the investment banks, funds and companies. In the 1980s institutional investors were added to this list: pension funds, safety funds and investment companies, mutual funds that attracted the means of individuals. The end of the 1990s brought about the appearance of private investors in the market by changes in the relative profitability of financial instruments and technological opportunities. The decreasing profitability of state securities, the low interest rate of bank deposits increased demand for capital stock as the most profitable. The number of private investors has increased by 4-5 times in Western Europe. In the USA more than 55% of the population participates in the stock market directly or via mutual funds.

The experience of the world economy shows that for developing and transition economies during crisis periods, and under the conditions of stabilization, the state should play an active and constructive role in the process of financial market development, and especially in the securities market. The active role of a state is to promote a favorable climate for investments, to improve legislation and liberalization of the securities market regulations, to develop the market of state and municipal capital stocks, and capital stocks of state-supported enterprises. The contribution to the development of the stock market is possible via the system of administrative support of the main players and the economic stimulation of investors.

The stock markets of Kyrgyzstan and other transition countries

15 years have passed since the former Soviet countries took the path of independent development. From the first days of independence, each new state faced problems that should have been addressed in the past. The time to establish the transition, and then the market economy was small; former Soviet republics have done a lot within such a short time period to reform their systems. The level of success differs from country to country. Some were lucky to have hydrocarbon resources; some were able to keep the potential but lagged behind in reforms, others went into market economy reforms, but lost their fundamental positions. However generally speaking, all former Soviet Republics are similar in that they started enthusiastically and quickly adopting the basics of a market economy, coming from the same system of planned economy, and it was necessary for them to learn from both each other and developed nations.

Within this context, it is necessary to make a comparative analysis of the achievements of new post-Soviet states in developing one of the most important components of the market system - the stock market or the securities market, where the capital flows into the economy and state enterprises become private. It is useful to see the realities of the Kyrgyz stock market as being one of equals, taking into account its advantages and disadvantages rather than to hear from skeptics or to imply simply that there is no such thing as a securities market. Such an analysis will help us to see carefully and define all problems and lags in Kyrgyz stock market development in order to catch up with the leaders.

To have a complete comparative analysis, we have chosen the stock markets of Azerbaijan, Georgia, Uzbekistan, Ukraine and Kyrgyzstan, which can be considered to a certain degree as equals. In some countries like Moldova and Tajikistan, the stock markets are just starting to develop. The current state of the Russian and Kazakh stock markets cannot be compared with the others, since they are far ahead in size. Solid activities in the stock market are recently being performed by Ukraine as well.

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