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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2006
BAKU STOCK EXCHANGE
Anar Akhundov
President
As a consequence, the BSE completed
2005 with profit that gives us opportunity
to forecast and implement new projects
in 2006 according with the capital market
development.
2005 is remembered as the year of the 5th
anniversary of the Baku Stock Exchange
(BSE). Besides that it is necessary to note
the quantitative and qualitative growth of the
domestic market. This growth is marked by
the appearance of new instruments, new
categories of investors (including nonresidents)
and issuers, growth of profitability
in the market and institutional development
of market participants. As a consequence,
the BSE completed 2005 with profit that
gives us opportunity to forecast and
implement new projects in 2006 according
with the capital market development. It is
necessary to express our thanks to our
shareholders, partners and market regulators
that make more efforts for involving of open
market to the process of economic reforms.
Total turnover of the BSE for the period of
January-November 2005 came to US$ 479.6
million, that is in comparison with the similar
period of the last year more than a 5.9 times
increase. Moreover, turnover for this 11
months exceeds turnover for the last year by
4.7 times.
In 2005 NBA Notes, which appeared in the
end of 2004, showed enough positive
dynamics to catch the interest of market
participants in these instruments. From the
above turnover 41.9% resulted from the
placement of NBA notes. Turnover in the
secondary market in this tool was US$ 24.9
million, i.e. 5.2% of total exchange turnover.
HISTORY AND DEVELOPMENT
The establishment of a stock exchange was
a necessary step in the creation of a
modern stock market in Azerbaijan. Due to
its geopolitical location Azerbaijan is an
important regional center of business
activity. In this respect the availability of a
stable and developed securities market
plays a substantial role in the raising of
investors' confidence in the economy of
Azerbaijan and the region.
The shareholders of the BSE are leading
Azeri and foreign banks and investment
companies. The share of one shareholder in
the capital of BSE is equal to US$ 61,250.
The supreme decision-making authority of
the BSE is the General Shareholders
Meeting.
The trading floor of the BSE is equipped with
30 computerized trading stations, 18 of
which belong to the shareholders of the
Exchange. The other 12 are available for
new members.
Legal bodies (banks, investment funds,
broker firms) involved in professional
activities in the securities market with special
license from the State Committee for
Securities under the auspices of the
President of the Azerbaijan Republic can
become members of the BSE.
FUTURE OUTLOOK
Increase of volumes and state securities
liquidity
Firstly, there is a forecast of US$ 141.4
million for the state budget deficit which is
supposed to be funded through a T-bills
issue that in theory means the placement of
T-bills in the sum of US$ 435-544 million, i.e.
more than several times the amount issued
in 2005. Secondly, the macroeconomic
tendencies that will be affected by the
process of denomination of AzM, allow for
the continuation of the placement of NBA’s
notes in the context of sterilization of the
money supply. Within these levels we may
then, forecast the volume of notes placed
last year, i.e. nearly US$ 217.6 million.
Development of capital market and
privatization
Azerbaijan is at the threshold of a “blue
chips” privatization, especially in the
telecommunication and transportation
sectors. From the point of view of capital
market development it will be more
expedient to use the method of IPO, in other
word initial public offer of stocks to wide
range of investors. This type of privatization
is currently under discussion in the
government.
Corporate securities market
After the “boom” of corporate bonds in
2004, large issues of non-bank securities
are expected. As it is underlined above the
development of a given market depends on
the government’s desire for a privatization
scheme and defined method of stock
offering. The BSE is developing listing rules,
where requirements for corporate
governance and international financial report
standards will be reflected.
Institutional development
Because appropriate legislation is currently
in place, the development of the capital
market and the expansion of the range of
financial tools is expected to foster an
environment of increased investment
activity.
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