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28 I Cover story bne May 2021
in detail. They should be fit as growth companies at time of listing.
As bne IntelliNews reported, the functions of the Capital Markets Development Agency (CMDA), which spearheaded these changes have been moved to Odilbek Isakov, the Deputy Minister of Finance, who is an ex-HSBC debt capital markets banker and who has a strong track record of introducing Uzbek state and large state-owned banks to the international markets, by heading the international debt issuances.
Ex-Goldman and ex-EBRD senior banker Atabek Nazirov, who had headed CMDA, now has moved
to head the private equity fund of Uzbekistan and became an aide to the Minister for Investments and Foreign Trade. Ex-Goldman Banker Sarvarbek
Akhmedov may head the department in charge of the securities market department of Ministry of Finance.
Underdeveloped market infrastructure is hampering the reduction of cost of funds to borrowers in local currency. Banks
do not have a functioning overnight placement of paper, nor a mechanism for repo, hence overnight funds are not being utilised to fund longer-dated paper.
This is one of the ways to reduce dollarisation of debt, reduce the cost for borrowers and help banks and insurance companies to earn more on the float, Hence whilst development of equity markets instrumental to start playing
a significant role in financing growth, local debt market infrastructure is important to stabilise the debt situation. As an example, Japan can withstand
large debt/GDP levels, due to majority of investors being local investors.
Perhaps, along with these measures,
the government should be open for dialogue with international investors
on pre-IPO investment and listing of smaller companies in international stock exchanges. It will give the needed hands-on experience and could further improve the capital markets operations in Uzbekistan. There are several strong candidates; however, they are not big enough to be considered a strategic asset, but big enough and are ready to be listed in international markets imminently.
Fiezullah Saidov is the CEO of Uzbekistan Equity Fund and a banking sector consultant for the IFC.
Uzbekistan's stock market sees its first big "pump & dump" incident
Ben Aris in Berlin
Tashkent’s Stock Exchange (TSE) had a rude introduction to the world of capitalism in January after shares in insurance company Universal Sugurta soared, taking the TSE index from around 900 to almost 1,900 points in a matter of a few weeks, only for the index to crash back to where it was by the start of March.
Controlled by Uzbek businessman Anvar Irchaev, Universal Sugurta is part of
the Orient Group, a diversified holding that also owns, amongst other things, a majority stake in Universal Bank and an asset management firm also under the “Universal” umbrella.
No one is quite sure what happened, but it looks like the local stock market has been introduced to the world of the fictional Wall Street investor Gordon Gekko, who made his money manipulating stock prices and from insider deals. Universal Sugurta's
www.bne.eu
stock price boom seems to have been the victim of a classic “pump and dump” play.
Turnover on the TSE is tiny. Despite reforms that now make it possible for foreign investors to buy shares and, crucially, repatriate their profits to their home country without restriction, few international investors are in the market.
That is important, as in other frontier markets like Vietnam there are some international players that largely track the index and a favoured scam is to pump up a stock to the point where it has to be included in the index because that forces the international index trackers to buy the shares and sucks in investment, at which point those that have been doing the pumping start the dumping.
However, Uzbekistan’s stock market is so underdeveloped that it doesn't have any index trackers yet, so there doesn't seem
to be any point to pumping a stock and there is little money available to attract.
Nevertheless, starting at the end of December someone began buying large blocks of shares, pushing the share price up close to the 20% gain-a-day limit, after which the market rules trading is stopped to prevent market volatility. This went on for several weeks, until the unknown traders stopped buying and the share price rapidly collapsed again in February.
At the start of December the stock was trading at UZS0.01 and the stocks had literally zero daily turnover. Then on Christmas Eve someone began buying in ever increasing blocks until the share price peaked on February 26 at UZS20 – a whopping 2,000-fold increase in just two months.
The trade volumes fell off after the peak and the share price quickly dropped by