Page 62 - BNE_magazine_12_2019 dec19

62 I Eurasia bne December 2019
Capital Markets Reform is now a priority of Uzbekistan’s government, privatisations via the stock market are on the way.
AFC: Capital Markets Reform is now a priority of Uzbekistan’s government
During his meeting, the president instruct- ed the regulator to create a stock market development strategy for the period 2020 to 2025, which includes seeing the free float of the Tashkent Stock Exchange reaching 10-15% of GDP by 2022.
This will initially be driven by the privatisation of SOEs. However, as SOEs are privatised and liquidity increases, helping to instigate a re-rating in the stock market, one of the second order effects of this includes private companies increasingly looking to the stock exchange in order to raise growth capital as they will be able to command higher multiples than in today’s stock market and forego high cost bank loans, which currently cost 20% to 25% per year in local currency.
Several companies in the pharmaceutical, financial services and manufacturing industries have already begun researching the potential of an IPO and it would not be unforeseen to have this number increase markedly over the coming years.
The domestic corporate bond market is currently very immature, though one near term catalyst to invigorate it is the government’s desire to start holding regular auctions of T-bills and treasuries that has been done with such success
in other markets like Russia and more recently in Georgia and Ukraine.
As currently only commercial banks can buy government bonds, the market is expected to be liberalised in the
near future where local retail and institutional investors will be able to participate. By creating more demand
Scott Osheroff in Singapore
On October 7, 2019 Uzbek presi- dent Shavkat Mirziyoyev held
a meeting with several minis-
ters and public agencies, including the Capital Markets Development Agency, where he directed them to “consolidate all relevant laws, acts and decrees into
a single, simple and flexible capital mar- kets code by the end of 2020.” The atten- tion now being paid to the development of the Uzbek capital markets is a key ingredient, which should lead to more market depth and liquidity in both the stock market and the nascent corporate and government bonds markets.
As the government executes its privatisa- tion programme by completing partial or full divestments of most state-owned enterprises (SOEs), the stock market is the preferred mechanism for this and is expected to lead to higher free floats and
www.bne.eu
a subsequent increase in liquidity and market capitalization.
The current market capitalization of the Tashkent Stock Exchange is a mere $4.8bn, or approximately 9.6% of GDP, an extremely low number relative
“The president instructed the regulator to create a stock market development strategy, which includes seeing the free float of the Tashkent Stock Exchange reaching 10-15% of GDP by 2022”
to other markets such as Singapore, Vietnam and Russia whose market capitalization to GDP are 144%, 76% and 35% respectively.
for government debt, the government should be effective in creating a local yield curve, which will make it easier for corporates to issue debt.