Page 54 - Small Stans and Causcasus Outlook 2022

5.6 Markets - Azerbaijan

Azerbaijan’s bond and security market grew by 24% in 2021. The total volume
of securities transactions at the Baku Stock Exchange in January-November
2021 amounted to AZN14bn. As a result, compared to the same period last
year, the total trading volume increased by 24%, repo transactions by 243%,
other corporate securities, excluding mortgage bonds by 567%, and the
secondary market trading of these corporate securities by 181%. On the last
trading day of November 2021, the capitalization of the Baku Stock Exchange
increased by 10% compared to the beginning of the year and amounted to
AZN4bn.

SOCAR started selling bonds in September 2021. They will be released for five
years. The total volume of bonds is $100mn and the face value of each is set
at $1,000. The annual interest rate is 4.5% and interest income will be paid on
a quarterly basis. Pasha Capital and SilkWay West Airlines also joined
together with the former as underwriter, selling bonds worth $10mn.

According to the Ministry of Economy, over 2021, the yield on government
securities and interest rates in the interbank market have been declining. In
general, the yield of government securities decreased by 2-5 percentage
points depending on the term and traded in the range of 4-7% by the end of
the year. Only in recent months, a certain increase in these percentages has
been observed. No significant change was observed in nominal interest rates
on loans and deposits. In November of the current year, the average interest
rate on new loans in manat was 17%, the average interest rate on newly
attracted deposits and savings was 8.5%. Rising inflation is accompanied by
lower real interest rates.

In 2021, the level of dollarisation of deposits continued to decline. The share of
foreign currency deposits and deposits in total gradually decreased from
56.4% at the beginning of the year to 51% in November. In particular, the
dollarization of deposits of individuals fell from 50.8% to 41.9% at the
beginning of the year, and the dollarisation of loans fell from 29.8% to 26.5%,
respectively. For the first time since the beginning of 2015, the share of
deposits of individuals in manat exceeded deposits in foreign currency.

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