Page 45 - bneMag Dec22

bne December 2022 Special Report I 45
bringing in a fresh $20bn and $5bn of international capital to the local bond markets respectively.
Odilbek Isakov, Uzbekistan’s deputy Finance Minister, told bne IntelliNews that Uzbekistan has already issued $1bn worth of local treasury bonds this year as well as issuing its first “floater”, a bond linked to the inflation rate, and
a local bond with a 10-year maturity – the longest ever – in just the last month.
And in June Uzbekistan saw its
first corporate bond issue on the
local exchange by the white goods manufacturer Artel in a landmark deal.
The European Bank for Reconstruction and Development (EBRD) also bought some Uzbek treasury bills in the first week of November in a landmark deal
working on improving them since October 2019, when Uzbek President Shavkat Mirziyoyev held a meeting with several ministers and public agencies, including the Capital Markets Development Agency, where he directed them to “consolidate all relevant laws, acts and decrees into single, simple and flexible capital markets code by the end of 2020”, putting capital markets reform at the top of the agenda.
That was followed by another decree in April 2021 that spelled out more details of the reforms, including an upgrade of the IT system and allowing international investors to sell their shares and repatriate their earnings in hard currency for the first time. International fund AFC Capital, which had a few million dollars invested into Uzbek
equity at the time, and more now, tested the system and reported that it works.
The edict comes with ambitious targets that are set until the year 2023
(See table below).
“The development of the equity market will allow local corporates to deleverage by offering them an alternative source of capital as they are now highly leveraged,” Paresishvili says. “That affects the banks too, as they are not so willing to lend to corporates forever.”
Paresishvili has a long shopping list of reforms that still need to be made. The local CSD needs an upgrade, as almost as important as allowing foreigners
to buy shares is having decent infrastructure for holding them once you own them, Paresishvili says.
“Buying shares is only half the bargain; you also need somewhere to hold the stocks once you own them. Bringing partners like Bank of New York Mellon (BONY) will help as they can also
give access to many new markets,” Paresishvili told bne IntelliNews. “The TSE IT system also needs an upgrade, the same thing we did with the GSE.”
1.9 45
0.3 5
0.16 3.94
0.03 5
- 40,000
4,000 20,000
- 5
“The Ministry of Finance was looking for someone with experience in both international and regional capital markets, and for someone who at the same time spoke Russian”
– the first foreign entity to buy a local bond and the development bank’s first investment into local securities.
“The government of Uzbekistan is now starting to bring large state-owned companies and banks to a local market by privatising them through IPOs on the Tashkent Stock Exchange,” says Paresishvili. “But the liquidity on the local stock market is pretty low as we are still very much a Frontier Market. The development of equity market allows local corporates to deleverage by raising additional equity” Paresishvili says. “That in turn enables Uzbek banks to lend more to local companies, which helps grow economy and create new jobs.”
Capital markets reforms
Hiring Paresishvili to run the TSE is designed to take Uzbekistan’s capital market reforms to the next level but the government has already been
Market Cap (free float in UZS trillion)
Free float market cap in % to GDP
Total Value of Corporate Bonds (UZS, trillion)
Total Value of Corporate Bonds (% to GDP)
Financial and Investment Literacy for population and entrepreneurs
Investment Settlement Accounts
Regional Development Projects financed through capital markets
Source: President of the Republic of Uzbekistan
Capital Market reform goals to 2023
2020
2023
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