Guy Norton in London -

The two rival stock market operators in Montenegro have finally seen the light of day and approved a merger that it's hoped will help to increase the credibility of the country's fledgling capital markets scene.

With a population of just over 600,000, it had long seemed farcical that Montenegro should boast two separate bourses, effectively splitting trading income and liquidity between themselves, and with neither capturing the imagination or cash of potential investors.

At the end of January the two exchanges voted in favour of a link-up, however, thanks principally to the efforts of Serbian-Montenegrin conglomerate Atlas Group, which raised its holding in both bourses in November to become the single largest shareholder in each. Following the November transactions, Atlas controlled 47% of the Montenegro Stock Exchange and 38% of NEX Montenegro, and tabled plans for a merger as a means of attracting greater investor focus and investment on the Montenegrin capital markets. Djordje Djurdjic, head of Atlas' investment fund Atlas Mont, says the lack of a single port-of-call for portfolio investors had acted as a disincentive to foreign investment.

According to Mila Redzepagic, head of legal affairs at NEX Montenegro bourse, which was established in 2001, the creation of a single, strong and competitive bourse will result in a more transparent and liquid capital market, which could smoothly integrate into a future regional capital market. "The connecting of the single bourse to the international capital market would secure a more serious presence of foreign investors on the domestic capital market," he says.

In addition, NEX believes the merger will contribute to greater professionalism, improved regulation and supervision on the Montenegrin capital market, and further convergence with EU financial market standards.

Nedeljko Suskavcevic, director at the Montenegro Stock Exchange, which was set up in 1993, adds that he hopes the merger would be completed "in the next two to three months."

The link-up of the two exchanges could also spark competition for the merged bourses' affections from foreign stock market operators. Previously, Croatia's Zagreb Stock Exchange, Austria's Wiener Boerse and Nordic operator OMX have all expressed an interest in buying into Montenegro.

The Montenegrin merger is the latest step in a consolidation process among exchanges in Southeast Europe. In 2005, the Bucharest Stock Exchange merged with its Romanian rival Rasdaq, while in Croatia the Zagreb and Varazdin stock markets tied the knot in 2007.