Prospects for the development of the Ukrainian stock market under the conditions of martial state

Bilous Kostiantyn
PhD in Economics, Lecturer at the Chair of Financial Management and Stock Market, Odesa National Economic University, Odesa, Ukraine, E-mail: kostiantyn.bilous@gmail.com, ORCID: https://orcid.org/0000-0002-2891-3640

Cite this article:

Bilous K. (2024) Prospects for the development of the Ukrainian stock market under the conditions of martial state. Ed.: V.V. Kovalenko (ed.-in-ch.) and others [Perspektyvy rozvytku rynku kapitaliv Ukrainy v umovah vojennogo stanu; za red.: V.V. Kovalenko (gol. red.)], Scientific Bulletin of the Odesa National Economic University (ISSN 2313-4569), Odesa National Economics University, Odesa, No. 12 (325), pp.45-52.

Abstract

This paper examines Ukraine's stock market's current state and development prospects under martial law conditions, which have imposed unprecedented challenges and structural transformations. The research identifies key systemic issues, such as low liquidity, the market’s heavy reliance on government bonds, outdated exchange infrastructure, high levels of non-performing loans (NPLs), and limited integration of financial innovations. Additionally, the study underscores the population’s low trust in investment instruments, which restricts private capital participation and impedes the diversification of market instruments. By analyzing the Ukrainian market’s performance alongside comparative experiences of countries like Georgia and Croatia— both of which underwent significant economic disruptions due to conflicts—the research draws actionable lessons for Ukraine’s recovery. The article's primary goal is to propose a roadmap for addressing the challenges facing Ukraine’s stock market. The recommendations focus on stimulating market liquidity through fiscal incentives and expanding the range of financial instruments, modernizing exchange and clearinghouse infrastructure, aligning regulatory frameworks with international standards (such as MiFID II and CRD/CRR), and integrating innovative financial technologies, including blockchain and decentralized finance (De- Fi). Moreover, the study emphasizes the importance of educational campaigns to enhance financial literacy and build public trust in capital markets. To achieve these objectives, the study employs a combination of analytical, synthetic, systematic, and graphical methods to assess market dynamics. Using recent data, the research illustrates how the trading activity in Ukraine has been concentrated in domestic government bonds (OVDP), which account for over 90% of trading volumes. Other market instruments, such as equities and corporate bonds, exhibit weak performance, reflecting limited investor confidence and structural barriers for private companies seeking market access. These findings reveal the pressing need for policy interventions to diversify the market and strengthen its resilience against macroeconomic shocks. The article also evaluates international financial recovery strategies, particularly those implemented in post-conflict economies. For instance, Georgia’s recovery from its 2008 war with Russia was supported by a $1.2 billion stimulus package and over $4.5 billion in international aid, which helped stabilize its economy and resume GDP growth. Similarly, Croatia’s experience during the 1991–1995 war highlights the importance of reducing clientelistic economic practices and transitioning toward a competitive, market-based financial system. These lessons serve as a foundation for Ukraine’s strategy to restore its financial market functionality and attract international investment. The study's practical significance lies in formulating strategic directions to ensure the sustainable growth of Ukraine’s stock market as a vital tool for post-war economic recovery. By implementing the recommended reforms, Ukraine can position its stock market as a competitive player in the global financial system. Furthermore, this transformation would enhance the market’s role in mobilizing domestic and foreign investments, boosting investor confidence, and fostering long-term economic stability.

Keywords

stock market, liquidity, stock market infrastructure, financial innovation, martial law, bonds of domestic state loan.

JEL classification: G010; G180; G210; G230; G240;DOI: https://doi.org/10.32680/2409-9260-2024-12-325-45-52

UD classification: [336.7+339.7]:341.3

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