By Azernews

By Amina Nazarli 

Operations on bonds of Azerbaijan’s state oil company SOCAR exceeded $110 million on the secondary market, said SOCAR’s chief consultant on capital markets Ali Agaoglu.

He made the remarks addressing the conference, titled “Capital Markets of Azerbaijan: Opportunities and Prospects”, in Baku on October 17.

According to Agaoglu, the share of SOCAR bonds on the secondary market of corporate securities of Azerbaijan reached 77 percent for the past year, while the remaining 23 percent accounted for bonds of other issuers.

“Operations on SOCAR bonds amounted to almost $110.75 million during the year, while on bonds of other companies – exceeded $32.67 million. The demand for SOCAR bonds increased by 167 percent,” said the chief consultant.

SOCAR started selling its bonds, worth $100 million (100,000 bonds, each worth $1,000), on Sept. 20, 2016. The sale of SOCAR bonds in Azerbaijan’s secondary market began Oct. 18.

SOCAR bonds will be in circulation until 2021, with 5 percent yield and a payment carried out once in three months.

Interest payments on SOCAR’s bonds are made according to a pre-announced schedule (January 17, April 17, July 17 and October 17). Today, the fourth interest payment will be carried out. In general, the owners of bonds will earn $5 million.

Along with Azerbaijani citizens, SOCAR bonds can be purchased by foreign individuals and legal entities on the secondary market. Currently, investors from Russia, Turkey, Georgia, Kazakhstan and citizens of other countries are among the investors in SOCAR bonds.

Speaking at the event Chairman of BSE Management Board Vugar Namazov said that Baku Stock Exchange (BSE) is ready to hold an initial public offering (IPO).

Namazov said that traditional financing instruments can no longer fully function and, if before the BSE had to explain to companies the need to enter the stock market, now the companies themselves have begun to actively seek ways to attract investors.

“Currently, capital markets have become a necessity,” he added.

“Thanks to the work done last year, we were able to successfully place the bonds worth $100 million of [Azerbaijan’s state oil company] SOCAR,” noted Namazov.

He went on to say that today the BSE operates as a modern platform of trading and post-trading service Centralized Trading Exchange system (CETA), which allows conducting about 25,000 transactions in a quarter of a second.

Vusal Gasimli, executive director of the Center for Analysis of Economic Reforms and Communication addressing the event said that securities market creates very good conditions for increasing the liquidity of Azerbaijan’s financial sector.

“Currently, the level of liquidity only in the banking sector is about 5.2 billion manats. For lending to the economy, banks could use the securities market on a par with the current "deposit-credit" algorithm [when a deposit of one client is used as a credit for another client],” Gasimli said.

He reminded that strategic roadmaps provide for establishment of a “market of investors”. In this regard, it is necessary to diversify investment instruments, according to Gasimli.

“We should have many funding sources, but along with this, we also need to diversify the investor base. This is also a very important point. We need to create directions for investors. For example, institutional investor could finance global projects for economic development, and retail investor could invest in bonds.”