Friday, July 29 2011 19:36

If there are profitable tools, resources will be found by all means

ArmInfo. Interview of Acting Director General of NASDAQ OMX Armenia Karen Zakaryan with ArmInfo News Agency

Mr Zakaryan, we congratulate you on the fact that you have recently assumed the office of acting director general of the stock exchange. You are well familiar with the specificity of the Armenian capital market. How do you assess the conditions of this market and what do you think of its professional participants?

Before answering your question, I'd like to share the news of the stock exchange with you, its plans for the future and the innovations we are preparing. I am glad to say that the innovations are not few. I'd like to note that the stock exchange has set itself a goal to turn into an institute allowing the professional participants of the market to receive an access to various financial tools that may circulate in the stock exchange. For this purpose we are extending the tools of the stock exchange.

For instance, immediately after the creation of the floor of REPO tools, the stock exchange also launched the floor of interbank loans in 2010. At the moment very serious work is being done to start the trade of time loans at the stock exchange in 2012, which requires quite serious technological solutions and complicated regulations. According to our forecasts, this marketplace will become one of the most active exchange trading marketplaces. The work experience in the capital market has demonstrated that its growth is directly connected with the effectiveness systems and mechanisms; only in this case the market starts actively growing. The bright example of that is the creation of the floor of currency operations in 2005. Over the first year of activity of this floor, the interbank trading annually reached 0.5 million dollars. 6 years later, the average daily volume of transactions with currencies grew to 3.4 million dollars.

In the meanwhile, it is obvious that over these past 6 years we have acquired tangible results for neither foreign trade turnover of the country nor GDP. That is to say, such growth in transactions at the stock exchange demonstrates one thing only: the system introduced by the stock exchange has proved to be very effective. The same can be said about the interbank loan resources. The volume of transactions on this floor has exceeded 20 billion for several times.

As regards the current conditions of the capital market, the problems do not stem from the stock exchange, as the stock exchange only provides effective mechanisms to all participants of the market. The liquidity and volume of transactions on all floors are different. I'd like to point out that the capital market is considered to be one of the most difficultly developing sectors of the financial market. Its development depends on the general economic state, principles of business conduct, number of not only professional players, but also investors. The activities in the capital market imply transparency, domestic regulatory activity, complete disclosure of information, a positive history and many other things. All this needs a lot of time.

Yet, there will be new issues of corporate bonds this year. Have the potential issuers made any statements?

It is a little hard to make any forecasts about this issue. Only one issue of corporate bonds has been organized in the market so far this year; let's hope this is not the last issue. The point is that today the professional participants of this market are to work more actively, a certain environment should be created, which will create more favorable conditions for new emissions, as the current situation in the financial market does not get on the right side of it.

In particular, when speaking of the market difficulties, many professional participants of the capital market point out the yield of the government bonds. The yield of this tool is enough for all investment expectations to be satisfied; consequently, emission of securities with a higher yield than the government bonds is not profitable for economic entities. On the other hand, the same economic entities attract cheaper loans from the capital market participants, particularly, from the banks; in their turn, the banks prefer working with them rather on credit terms than with the use of capital market tools.

As a result, the market faces a deadlock situation. How to overcome this situation with minimum losses?

I think that in the course of time the environment will become more favorable for new corporate emissions. If the yield of the government bonds declines within a certain period of time, wider opportunities will be created for that. I should say that the volume of government bonds has doubled over the past 2 years and amounted to 180 bln AMD (against 90 bln AMD in 2010). On the other hand, this shows that the government bonds allowed collecting 90 bln more AMD from the market.

At the same time, we realize that approximately the same amount of corporate bonds could have been placed if the capital market participants were active and did more effective work with the issuers. That is to say, there are tools and investments; one should only work at introduction of new tools.

What do you think disturbed the capital market players to attract this money by issuing corporate bonds?

The fact is that this 90 bln has already effectively been placed in treasury bonds. The matter concerns the fact that a year before nobody forecasted that the domestic debt market could effectively be increased by 90 bln AMD. For this purpose one should simply have displayed the initiative and worked more actively with the potential issuers.

You have mentioned that if the yield of the state bonds declines, this will create favorable conditions for emission of corporate bonds. Has the market got any premises, which signalize their forthcoming reduction to the level that will allow the issuers to make profitable emissions?

I cannot make any forecasts about that because the level of the yield of the state bonds within a certain period of time depends on a whole number of factors. This will even depend on the intensity of the placement of new tranches by the state.

How much money do you think one can raise with the use of corporate bonds in the domestic market? I think we have no problems with the sufficiency of resources in the market. That is to say, the matter only concerns the lack of the relevant tools of investing, because if there are good and profitable tools, I think the relevant resources will be found by all means.

By Elita Babayan

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