Stock markets to become more active in Azerbaijan

27 January 2016 15:21 (UTC+04:00)

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By Nigar Orujova

Azerbaijani government continues work to stabilize economy and private income of the population by holding a number of reforms. One of them is a plan to issue manat and dollar bonds for placing on the domestic stock market.

“The main goal of issuance debt obligations in manats is to increase confidence in the national currency and to attract household savings to the market,” Finance Minister Samir Sharifov said in an interview with ANS TV channel.

“At the same time, the yield on dollar bonds will be lower than the interest rate on bank deposits, to prevent the outflow of funds from the banking sector,” he added.

The yield on manat bonds will exceed the rate of inflation for this year and will be about 11-12 percent, while the interest rate on dollar bonds will be 3 percent, the minister said.

He also noted that the foreign currency, which population holds now, are in fact ineffective.

“That is why we propose the mechanism, which will enable money to be in circulation, and to generate income. Storing a large amount of currency in the house is risky,” the minister explained.

“We must think and not succumb to the hype. People exchange their last manat for dollar. So what to do with them then? Therefore, we should not panic. The market is stabilizing, and will continue to,” the minister added.

The State Committee for Securities registered the prospectus of short-term and medium-term treasury bonds totaling 400 million manats ($ 250 million) on January 27.

The Committee reported that as part of short-term bonds issued emission total of 1.5 million units and 2.5 million units of medium-term bonds. The nominal value of the bonds as part of the issue is 100 manats ($ 62.5).

Earlier, the State Committee registered the prospectus of short-term and medium-term treasury bonds totaling $ 500 million, the committee reported on January 26.

Three million of short-term and two million medium-term bonds with a par value of $100 each were released as part of the emissions.

Placement of the bonds will be based on cut-off price at auction at Baku Stock Exchange. Persons, who are not participants in trading on the BSE, have the opportunity to purchase these bonds through investment companies-members of the stock exchange.

Vahid Ahmadov, a member of the Parliament, told Azernews that issuing of bands is quite positive step.

“It is of great importance in the current situation and will benefit the population,” the MP said.

People can put part of their money in bonds and the government secures them.

He noted that along with placing money in bank, people can save and benefit their money by buying bonds, that can bring profit once a year.

“Issuing bonds is important both for the population and for the state, as it will not only bring benefits to population, but also bring money to budget,” he said.

Speaking about the safety of this form of investment, Ahmadov said that the bonds are securities protected by the state. He does not believe that they can be risky in the near future.

In Azerbaijan, there are several popular ways of investing by the population. One of them is construction sector, but prices go down for a quite long time and they may go up soon, the expert said.

Another opportunity is saving money in banks. After the first devaluation, many people began taking back their money from the banks of the country, the number of which is over 40.

Head of the Central Bank of Azerbaijan Elman Rustamov said earlier that Azerbaijan's banking sector, which allocated 80 billion manats for lending to the economy over the past 10-12 years, is stable in general and is characterized by high indexes.

Earlier, Azerbaijani parliament adopted some amendments to the laws on deposit insurance, currency regulation and complete deposit insurance.

Under these changes, the deposits of population in the banks, which are members to the Azerbaijan Deposit Insurance Fund, have been insured for three years, regardless of the amount of deposits. Previously, the maximum level of insurance coverage for deposits was 30,000 manats.

Ahmadov also said that population should better invest than put their money under cushion. People can invest in banking sector, he added, and take about 12 percent benefit in the national currency a year. According to new amendments, all savings in the banks of the country are secured by the state for 3 years, which make this type of investments more reliable.

Speaking about other steps the state can take to support its population, he said that currently the Economy committee of the Parliament is focused on the individual loans taken in dollar.

“I believe, loans under $10,000 should be returned by the old rate,” the parliamentarian said.

Another investment opportunity of the population is insurance market where 27 companies are operating. Last year, the growth rate of the insurance market in Azerbaijan exceeded three percent. According to the State Insurance Supervision Service, the insurance market continues to show resilience in Azerbaijan.

Nigar Orujova is AzerNews’ staff journalist. Follow her on Twitter: @o_nigar