Stock Market: Here We Go Again
By Anduela Nika
Albanian Daily News
Published July 14, 2017
The Central Bank of Albania just approved a new private stock market in the hope that it will finally create a capital market, after the failure of the state one. With an initial capital of 50 million ALL, the opening of the stock exchange certainly shows levels of maturity of the financial market but will it have the fate of Tirana Stock Exchange which met its demise 12 years ago? No company has been listed on any type of exchange in Albania and it is now painfully clear that no one knew what exactly a stock market did and how to trade in it back then.

I remember back in 2010, when I was on my Spring Term of post-graduate studies at University of Maryland's Philip Merrill College of Journalism, I decided to take a deep dive into Business Journalism.

On our first day of class, after some quick introductions the professor starts to talk feverishly about the stock market and how this or that company was doing and all of a sudden chose me out of the 10 students in the class answer his question... If it was worth investing now in X company, how much weight should we give their profit/earnings ratio, analysts forecast of future share values increase, and overall capitalization? I was caught off-guard, and more to the point, I had no meaningful idea how to reply to those questions.

I shrugged and the only words I could mutter were: "We don't have a stock market in Albania. I have no idea how to perform this analysis or even why those people shout at NYSE". My classmates laughed and thought I was trying on being funny, but I was not. I was totally clueless on how the stock market worked. Nearly fifty years (1944-1991) of communism removed all but the most rudimentary understanding of capitalism.

Later that day I asked for some suggestions on books on the topic, which was a complete virgin territory to me, to Marcus Brauchli, at the time Executive Editor at the Washington Post (to whom I had been introduced by my fellow Albanian, Bill Kovach). Bill Kovach has been former Washington bureau chief of The New York Times and former editor of the Atlanta Journal-Constitution.

Marcus Brauchli was very kind and he replied to my email by suggesting reading the books of his former WSJ colleague Dave Kansas ( and see if that helps and also joking that maybe I should go back and start a stock exchange in Albania!

Today I know more about the workings of stock markets, enough to know that Albania still is in the 'wannabe' phase of stock market development.

First Time 'Round

In 2002 the Tirana Stock Exchange opened with great fanfare to the media. Twelve years later in 2014 it closed without having listed even one company in the intervening 12 years, failing in its objective to creative a capital market in Albania.

The Tirana Stock Exchange didn't prove attractive to local business and this according to experts came from their immaturity and "fear" to be listed in TSE, lack of support from donors, lack of culture regarding free market commerce, the high level of informality in the country, the short life of private businesses, lack of financial brokerage companies and difficulties in fulfilling the list of criteria's to enter in the stock market.

These same problems face any new private stock exchange. Although successful stock exchange in Albania would be undoubtedly a positive development, useful alternative to the overly liquid (foreign-owned) banking institutions, the perpetual heavy burden of non-performing loans among Albania's largest companies now does not bode well.

Going Big, Fast

The relatively small Albanian economy is certainly in dire need to develop its capital market and to expand it beyond its border for long term stability. It neighbors are its natural allies, benefiting from access to the Albanian capital market. The creation of a Regional Stock Market (Albania, Macedonia, Croatia, Kosovo, Serbia, and Montenegro) would offer greater market stability and lower transaction cost and force market harmonization, all very positive features for the development of the region and Albanian companies in particular.

The Albanian economy could benefit from a stock exchange in three critical ways. First, they allow individual investors to own part of a successful company. Second, stocks provide an alternate, competing source of capital to private banks for companies to grow, moving quicker to capture identified competitive advantages and efficiencies. Third, stocks give a third-party assessment of how valuable investors think listed companies are.

When stock prices rise, it means investors think earnings (profit) will improve faster than any increase in production cost. Falling stock prices mean investors have lost confidence in the company's ability to increase its profit margins vs. rising cost.

The stock market, at the end of the day has the potential to be an excellent independent economic indicator that Albania has been is lacking for so long. But truth be told, until we see a critical mass of actual companies getting listed and shares trading, the new stock market remains only an expression of hope.

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