Stock Market Analysis

Stock Market Analysis

Securities market of Azerbaijan is using only a small part of its potential, Chairman of Managing Board of Association of Azerbaijan Stock Market Participants (AASMP) Jeyhun Ibrahimov said in an interview with Trend.

"The potential of the securities market of Azerbaijan is quite high, which, in particular, is confirmed by the demand for notes issued in recent years [by the Central Bank] and government bonds," Ibrahimov said, adding that the market has the necessary infrastructure, a modern trading system, potential investors and sufficient profitability.

Ibrahimov cited the issue of bonds by the Azerbaijani state oil company SOCAR in 2016, as well as the subsequent successful placement of bonds of Metak and Unibank, and the planned issue of bonds by the investment company Invest-AZ as successful examples of placement of securities on the stock market of the country.

"All this indicates that the stock market of the country has sufficient potential. Now, we are using just a small part of this potential, and in order to use it at full capacity, it is necessary to ensure transparency and accountability of companies, and only then to work to attract new investors," he said.

Stock market in Azerbaijan experiencing natural growth

Ibrahimov also commented on the current situation with stock exchange transactions.

The stock market in Azerbaijan is at the stage of natural growth, he said.

In 1H2018, the volume of stock exchange transactions amounted to 68.6 million manats, while this figure for the same period last year equaled to 650.5 million manats.

However, Ibrahimov explained, last year such a volume was formed mainly due to the January issue of shares for 600 million manats by the International Bank of Azerbaijan.

"Thanks to this, the volume of stock market exceeded 600 million manats last year. However, on the other hand, this year the volume of transactions in the secondary market of shares amounted to 42.4 million manats [data for six months], while this figure for the same period last year equaled to 1.4 million manats. Given this, we can say that a natural growth is observed in the stock market this year," he said.

At the same time, Ibrahimov believes that the volume of exchange transactions in Azerbaijan is less than in neighboring countries.

"The potential of our market is many times greater than the current one. The main reason for the insufficient use of the potential is that companies lack transparency. As a result, investors are more interested to carry out REPO operations."

Ibrahimov believes that certain responsibility for further development of the market falls on professional market participants, who should educate companies.

"By the way, work in this direction has intensified in recent years," he added.

Azerbaijani investors more interested in shares of foreign companies

The head of AASMP also spoke about the demand for foreign securities in Azerbaijan.

According to him, Azerbaijani investors are more interested in shares of foreign companies than local ones. Ibrahimov believes that the main reason for this is the lack of information about the shares of local companies.

"Both local and foreign information resources provide much more information about the shares of foreign companies than about the shares of local companies. Despite the fact that the Electronic System for Information Disclosure (MEAS) has been operating in Azerbaijan since 2015, very few people know about its existence. Meanwhile, an information disclosure system is the basis of the stock market of any country," Ibrahimov said.

Tax privileges for participants of Azerbaijani stock market

The AASMP plans to achieve the introduction of tax privileges for participants of the securities market, Ibrahimov said.

He noted that the association also plans to contribute to creation of a modern system for trading in derivative financial instruments, the full digitalization of the trading process, as well as to expand the work on awareness campaign.

"We have already done some work in all these areas and we expect to see concrete results in the future," he added.

Priority directions in development of Azerbaijan’s stock market

In general, Ibrahimov continued, the activities of AASMP over the years, was divided into three main areas: informing and raising awareness about opportunities in the securities market; conducting analysis for ensuring more effective implementation of existing legislation and regulations, preparing proposals on improvement of legislation; cooperating with other associations, non-governmental organizations, government agencies and universities with the purpose of developing the securities market.

"In the first direction, we are already cooperating with the media and have achieved constant publication of information and materials about the stock market. At the same time, in addition to publishing materials, we also hold various seminars, conferences and meetings with companies and potential investors," he said.

Ibrahimov said that within the second direction, the association has already sent a number of proposals to both the Financial Market Supervisory Authority, the Ministry of Taxes and other agencies.

"We have achieved the implementation of some of these proposals, negotiations on some proposals are still going on," he said.

As for the third direction, AASMP has established active ties with all associations in the country, Ibrahimov said.

"Within the cooperation [with associations], we plan to hold several joint events next year. In addition, we have held several seminars in cooperation with the Financial Markets Training Center and plan to further strengthen this cooperation. We have also held and will continue to hold such seminars with a number of universities," he said.

The Association of Azerbaijan Stock Market Participants has been operating since 2007. The members of the association are the Baku Stock Exchange, the National Depository Center, the Unicapital, Kapital Menecment, Invest-AZ, AzFinance, PASHA Capital, PSG Kapital and Xalq Kapital investment companies.