International Markets

Given my direct experience working in the emerging markets of the former Soviet Union, I am often asked about the quality of companies listed on public exchanges in countries like Ukraine, Russia, and Kazakhstan. My first response is that I am not a licensed broker and therefore cannot directly offer investment advice. That said, an interesting report published earlier this year from Concorde Capital in Kyiv, Ukraine caught my attention:

"20.02.2007
Only 7 Ukrainian Companies Approach International Corporate Governance Standards

"Concorde Capital became the first investment bank to conduct a comprehensive study of corporate governance in Ukraine. The study’s intended audience is foreign investors who invest in shares of Ukrainian companies.

"We rated 118 companies, including several listed on foreign exchanges, encompassing all sectors of the Ukrainian economy. We chose companies based on their investability and overall interest to investors. For these reasons we have decided to make Reporting & Disclosure, Investor Relations, Minority Concerns and Strategic Risks the focal point of our report."

(A full copy of the report is available on the Concorde Capital website.)

In short, this is a stark reminder to those anxious to invest in these emerging markets. From my experience working and travel in Ukraine, this report is certainly not a surprise. I have regularly faced objections and refusals when working with companies in these markets regarding accounting transparency issues.

But if governance and transparency are an issue, how is it that the PFTS Index has risen from the mid-60s to 950 in the past 3 years. Not a bad return. . .