I recently spent two weeks in Belgrade to look at investment opportunities as I like Serbia’s long term trajectory. Obviously, I looked at real estate, and a written research report on the topic will get published in the weeks ahead.

Writing down the thesis and my analysis helps me make rational decisions.

I also investigated other ways to “play” Serbia. I looked at the local stock exchange and saw numbers that were quite mind-boggling. Not only was there very little liquidity, but the Belgrade Stock Exchange actually used to be quite something, with volume of about €2 billion per year before the GFC, but which cratered down to approximately €35 million in the last year.

Some of the valuations are cheap. I particularly like NIS, which is majority owned by Gazprom. It is one of the largest vertically integrated energy companies in southeastern Europe. NIS is involved in oil and gas exploration, production and processing, as well as oil products marketing. I like it, but did not buy it (you’ll find out why in the video).

I interviewed the business director of the Belgrade Stock Exchange to get a better understanding of the capital markets in Serbia, how the the stock exchange found itself in its current predicament, and what is the way forward.

He divulged some interesting catalysts ahead, which, if they do actually materialize, could lead to a re-rating of Serbian equities.

Alternatively, you can read the transcript below

This is what I do at The Wandering Investor

I travel around the world, looking for unique investment, residency, and citizenship opportunities for myself, and blog/vlog about it along the way.

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My research articles and Youtube videos typically get published a few weeks after the fact.

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The Wandering Investor

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Full transcript of “A 98% crash in volume at the Belgrade Stock Exchange. Opportunity?”

LADISLAS MAURICE: Hello, everyone. Ladislas Maurice from thewanderinginvestor.com here in Belgrade. I’m spending some time in Serbia looking at investment opportunities. I’ve been looking at real estate. But today, I’m off to the Belgrade Stock Exchange to meet the Business Director there to discuss the situation with capital markets here in Serbia.

So you’ll see it’s quite a unique market, low liquidity, but it’s crashed, and has just been flat for many years. And apparently, there’s some interesting developments ahead. So let’s go meet him.

So I’m here with Mr. Ristic, who is the Director of Business Operations here at the Belgrade Stock Exchange. How are you?

MIROLJUB RISTIC: Fine, thank you. Thank you for coming to us.

LADISLAS MAURICE: Thank you. So as a bit of background, so I came here to Serbia because I wanted to find investment opportunities. I am bullish Serbia long-term. I like the fact that it has a very unique foreign policy, trying to play off the West and the East, trying to find a middle ground to take advantage of both sides. It’s visible in the country’s free trade agreements with the European Union, with the Eurasian Economic Union, Russia, with Turkey, etc. So it’s Serbia has been very good at managing this.
Also, Serbia has been attracting a lot of foreign direct investment from everywhere. The country has a substantial current account deficit, which is an ongoing problem, but it’s really being covered by FDI. So, long-term, it looks very attractive if it stays on its current path. So I would like to have a bit of exposure to Serbia because it’s in Europe and it’s a unique play. So I came here, I looked at real estate, beautiful real estate but it looks like prices have ran ahead of themselves. So I started looking at the local stock market. I came across the webpage of the Belgrade Stock Exchange. I was looking at some figures, turnover is very low, to say the least. We had so turnover approximately €35 million in the last year. So it’s a low liquidity market. And a lot of the companies, to not say most companies, don’t have much information online, so it’s hard to find proper reports.
So essentially, I’m here to try to understand the market, essentially, why is the Belgrade Stock Exchange in the situation that it’s in currently compared to other markets around like in Hungary, or in Bulgaria, where there is a fair amount of liquidity, actually a lot of liquidity. So why are we in this current situation here in Belgrade and what’s the way forward?

MIROLJUB RISTIC: Okay, Maurice, thank you for those questions. First, I’m very glad that we can have opportunity to host you here and try to explain the reasons why the Serbian capital market is performing as it’s performing right now. I can say that you arrived just in time in Serbia. Yes, our capital market is currently under development. And I can exclusively say for you and share the information that in the nearest future, the Government of the Republic of Serbia will adopt the document named Serbian Capital Market Development Strategy that will tackle all the problems that current Belgrade Stock Exchange are experiencing and what are the problems with our companies, what are the problems with our capital formation here, and the current situation that Serbian capital market and the Serbian economy is bank centric and that capital market is not utilized at all, and doesn’t fulfill any of its primary functions.

So, I think that in the nearest future in the, I think, next year, we will see dramatic changes in this field, and that the capital market in Serbia will bring opportunities for the Serbian companies, for the Serbian economy, and, of course, for the investors like you. So I can say that you just arrived in time to step in on the Serbian capital market and to find good opportunities for you and your investors and followers.

LADISLAS MAURICE: Thank you, because we were chatting a bit, earlier, and you were explaining how the whole privatization process went. Essentially, the government privatized most companies when socialism ended, and these companies were essentially forced to list and workers all received shares. And then some speculative bubble happened in 2007, the trading volume was approximately €2 billion.


LADISLAS MAURICE: And since then, it’s gone down from €2 billion a year to €35 million a year. So it’s an insane drop. And since then, it’s just been flat. It would appear that there is potential, long-term, for things to rectify themselves.

MIROLJUB RISTIC: Yeah, definitely, the Serbian capital market should reflect the rise in the Serbian economy. And Serbian economy is rising right now, and you can see that on the streets even so. But the source of the current situation on the Belgrade Stock Exchange is in the method of the privatization that is done 10 years after the most socialist countries do it. So we started our privatization process in 2000, 2001. And basically, all companies that are currently traded on the Belgrade Stock Exchange and traded 20 years before are here by the rule of law. There was no single IPO until 2019, where we have first company that really tapped the market and make an IPO here in the Belgrade Stock Exchange. All the other companies arise from the privatization process.

And one of the major characteristics of our privatization that all shareholders get their shares for free, government gave them for free. So you have the very unique situation that people came from the socialist economy, get shares, didn’t know what and how to value those assets, what to do with them, etc., etc. So, we became really dependent on the foreign investors in time that you are talk about, in 2006, 2007, and ’08. And 90% of the turnover was made by the European investment professional investors, so investing funds major. And when global economy financial crisis hit, the normal portfolio allocation said, Okay, most frontiers should be cut, the most riskier positions should be cut. And they really cut those positions here in Serbia. Our major indices fell more than 80% in a very short period of time, and that was pretty dramatic for the development to capital market.

So when you don’t have naturally built the capital market, you don’t have the demand of your institution, demand based in Serbian, and we didn’t have pension funds in that time, we didn’t have significant assets under management in our domestic investment fund, because our investment funds started operation in 2007. So they have portfolio formation at the peak of the prices in 2007. So, in that moment, they have assets under management, I am not sure, I try, something like €400 million, €500 million, and they get really, really killed in next, I think, first six months of their operation.

So right now, we have the investment funds, but their assets under management were very slow. We had voluntary pension funds, but they are still not playing significant roles on Serbian capital market.

LADISLAS MAURICE: Yeah, because it’s also important for the country to develop its capital markets. As mentioned, the country does have the current account issue that’s being centrally plugged by FDI. Having a liquid capital markets would help with foreign direct investment and it would also ensure that people just don’t keep inflating a potential real estate bubble and take their money out of the country to go invest in other people’s stock markets, so that the money would remain in Serbia. So if these reforms do go through, that would be not only good for the country, but that’s also a clear catalyst for investors, whether institutional or retail, who would be interested in playing here on the Belgrade Stock Exchange.

I’m looking at some numbers, we’re not here to discuss specific companies, but some of these companies, looking at their PE ratios, are stupidly cheap. They are highly liquid, but they’re stupidly cheap. So potentially, for patient capital, but knowing that there’s most likely a clear catalyst in the form of reforms being passed through by the government, it could be an interesting play. Obviously, this is not financial or investment advice, but something is brewing here in the Balkans, something is brewing in the Serbian capital markets. I would just say try to follow the situation, because there is a developing story here in Serbia.

MIROLJUB RISTIC: Yeah. Definitely, you can say that, when you see the problems, when somebody see the problems, another one can see the opportunity. And we are talking about here, on the one hand, that there are the problems, but those problems are very huge opportunity for somebody who wants to invest in the frontier markets like Serbia is. I’m sure that there is a lot of potential on currently traded companies on the Belgrade Stock Exchange, but our main goal is to attract very vibrant private companies, very good private companies that are trying to expand their businesses. And right now, the only solution for them to get capital inflow is going to banks to get the credit. Okay, the interest rates are extremely low right now but–

LADISLAS MAURICE: What numbers are we talking? What are the rates?

MIROLJUB RISTIC: In dinars, they’re single digits, so it is very attractive for domestic companies. But you know, interest rates always can go on the other side and can rise dramatically. We saw that in the past. So to not utilize the capital market, to not utilize the potential that you can sell shares and acquire capital, I think it will be un-efficient move for domestic companies. Of course, in such situation, where we don’t have clear regulation and clear path that capital market is used for, yeah, there is the problem for the private companies to go on the market. Nobody did it. So just one company that raised the capital on the capital market.

LADISLAS MAURICE: How much did they manage to raise, approximately?

MIROLJUB RISTIC: I think they raised the €5 million.


MIROLJUB RISTIC: It’s a very good company, listed on the price as Fintel Energia. But it was an interesting story. The owner of that company is from Italia. He has experience from the Italian capital market from the parent company, Fintel Energia S.p.A. He raised capital on the Milan Stock Exchange. And he came to Serbia, it’s a wind farm, and try to do same here in Serbia. It was a little bit complicated for him, but he managed to do it. But for the few people from Serbia that they have not experienced something like that, like this guy from Italy he has experienced, so they are very reluctant to go on this path. It’s much easier for them to go to the bank and sign the credit letter.


MIROLJUB RISTIC: Yeah, it’s the first.

LADISLAS MAURICE: Great. Fantastic. Mr. Ristic, thank you very much for your time. Much appreciated.

MIROLJUB RISTIC: Yeah. Thank you.



LADISLAS MAURICE: So after this interesting discussion, I went to see one of the biggest brokerage houses here in Belgrade to try to get an understanding of how to open a brokerage account. It’s not easy, you need a local tax ID number. So this means giving POA to some lawyer who gets the tax ID number. Once you have this tax ID number, you can open a brokerage account locally, you can trade online. Essentially, only three or four of the companies out there are liquid enough to trade. But when you sell the security, you need to pay capital gains taxes locally of about 15%. And until you’ve paid your capital gains taxes, you’re not allowed to repatriate your funds. The process to pay your capital gains taxes takes about three months to one year.

So really early stages here in Serbia, but if these reforms in the capital markets actually take place, then it could get very interesting. So it’s almost a question of do you go in now when everything is complicated and really front-run everyone, or do you just wait to be sure that these reforms are actually going to pass, and then you just take a plane, rush, and just buy whatever is cheap and then wait for the rerating? It’s a balancing act.

All right, I hope you enjoyed this content. Make sure to subscribe to my private list at thewanderinginvestor.com, to follow me as I travel around the world and look at investment opportunities, and citizenship, and residency options as well. Cheers from beautiful Belgrade.