Page 31 - GEORptMay18

8.3 Stock market
EBRD’s lari-denominated bonds boost Georgian capital markets
Georgia has been the beneficiary of not one, but two lari-denominated bonds issued by the EBRD in the last year. On April 25, the bank issued the first lari-denominated Eurobond , worth GEL120mn (€46.7mn), on the London Stock Exchange. The move came after the EBRD made a GEL107mn public bond issuance on the Georgian Stock Exchange (GSE) in Tbilisi last June.
Part of the bank's drive to develop local capital markets, the bond issuances are bound to spur investor confidence in the Georgian economy, George Paresishvili, GSE's CEO, told bne IntelliNews in a telephone interview. The privately-owned Georgian bourse has seen activity on it dwindle in the aftermath of the Russian invasion of 2008 and the economic crisis of 2009. While before 2008, the volume of trading on the stock exchange exceeded $100mn per year, it almost came to a halt in 2009 and has never fully recovered.
As such, the EBRD's bond issuances are particularly timely and necessary. Firstly, the domestic market issuance boosted trading on the bourse, which stood at a mere GEL50mn in 2016, by offering local investors the opportunity to buy bonds issued by a trustworthy, AAA-rated, entity. Secondly, the Eurobond issuance provides a solution to investors with an appetite for lari-denominated securities, but reservations about buying local bonds, Paresishvili believes.
"The EBRD's presence has been very important for the local capital market and private sector in general. The bank acts as a benchmark for the local market. Furthermore, the revenues from the Eurobond will be used to reinvest in the local market through loans to local companies that normally have long maturity periods; so the Eurobond will likely increase the liquidity in the domestic private sector as well as peaking the interest of foreign investors," he explains.
That said, the EBRD's bond issuances are no silver bullet, for barriers remain to the development of capital markets in Georgia. By and large, Georgians do not yet have the culture to invest in stocks, preferring instead material
31 GEORGIA Country Report May 2018 www.intellinews.com