FEAS holds an interview with the Chairman of the Board at The Republican Stock Exchange “Toshkent” – Mr. Bekzod Usmonov. Ms. Armenuhy Hovakimyan, FEAS Deputy Secretary General spoke with Mr. Usmonov about RSE’s main key strategic initiatives, traded instruments, how COVID-19 affects the market and more.
Armenuhy: Hello, this is FEAS Talks and I am Armenuhy Hovakimyan, Deputy Secretary General of the Federation of Euro-Asian Stock Exchanges. We are continuing our interview series of FEAS Talks, and today I am very happy to have with me a CEO of Republican Stock Exchange of Toshkent Mr. Bekzod Usmonov with me. Mr. Usmonov thanks for joining me.
Mr. Usmonov: Good day, Armenuhy! Thank you for having me. Finally, we have met and it is an honor for me to participate in such a great initiative conducting interviews with FEAS members.
Armenuhy: Thank You very much Mr. Bekzod. Let’s start with the strategic thing of the RSE Toshkent. What are the key strategic initiatives RSE Toshkent is working on at the moment?
Mr. Usmonov: Right now, despite the fact that there is a pandemic situation all over the world, including Uzbekistan, the Republican Stock Exchange “Toshkent”, continues to work on some key strategic initiatives.
First of all, Privatization processes are taking place in a very effective way through our stock exchange. Last year, we have launched a Special platform, which helps to find potential strategic investors for the privatization of big packages of shares. This platform lets receive bids in our stock exchange to identify a potential investor for concluding the transaction in the negotiated auction. The main purpose of creating this platform is to provide absolute transparency in the selection of a potential buyer. Since the launching of this platform, 7 companies have been privatized for a total amount of approximately 7 million US dollars.
Moreover, I am happy to share that new listing rules will be implemented at Republican stock exchange “Toshkent” from the beginning of 2021. Very soon, we will introduce to the public new listing rules, which were created based on experiences of the leading exchanges, and adjusting some necessary points to our local market. I have to note that in new listing rules, we mostly emphasize on the providing transparency of the listed companies. In our opinion, transparency is a key factor for attracting investors in our market. Listed companies will be obliged to disclose almost 40 types of information, in addition to information, which they have to disclose by law. Also, currently according to acting listing rules, there are only stocks and corporate bonds can be traded at RSE “Toshkent”, but new listing rules will allow being listed another types of securities such as government and municipal bonds, securities of International financial organizations, and non-residents` public companies.
Also, we are closely cooperating with ADB on project, which is called “Financial Markets Development Program”. We have already implemented Gender equality program in our exchange within the framework of cooperation with ADB. I should say we became one of the first companies in Uzbekistan, which has taken such an initiative. We are planning to sustain current rates, where 40% of the governing body and also 40% of total percentage of all employees are women. In addition, according to our Gender policy, it has to be included as a minimum one woman till 2022 in the Supervisory Board. We are open to a diverse work environment and promote Gender Equality in Uzbekistan, therefore RSE “Toshkent” should be an example, for our listed companies to take such initiatives.
Armenuhy: Great! So you are managing now a big setup for a better future, Congratulations on that. We as FEAS are happy to know that our members are moving forward with the new initiatives with the new strategies. Good luck with that! Let’s come to the market, in one of the recent interviews you mentioned that the lack of instruments and the limited choice of them is somehow an issue. So now you are making changes in your listing rules to have other instruments, which is good. What other things you are doing in this matter to change, and what are the most active instruments traded in RSE Toshkent, have they changed during the last months?
Mr. Usmonov: I will begin with the second question, as I mentioned above, in our exchange, stocks are the most actively traded instrument and those top 10 most liquid instruments has not been changed dramatically over several months. Our leaders in terms of the number of deals in last month were stocks of “Qizilqumsement”, “Qvarts”, shares of “Commodity exchange” and securities from the banking sector.
Qizilqumsement is one of the leading company in Uzbekistan of producing construction materials, mostly cement. Four hundred fifty-five transactions were made with these shares last month with the volume of trade approximately 50 thousand dollars.
Shares of Qvarts were also one the most liquid securities at our exchange. This company is the historical one, which made the first IPO in Uzbekistan. This company is a leading manufacturer in the domestic market for producing glass.
The median price of all listed instruments has been increased by twelve percent over the last month and the number of transactions has been decreased to almost 4 percent.
I have to mention that, investors and traders can trade at Republican stock exchange “Toshkent” from anywhere of the world, and therefore, our volumes and number of transactions have not been affected so much from Covid-19 and lockdown. Investors can trade at home using our Mobile and Home trading system.
As you probably know, since the end of 2016, under the leadership of our President, Mr. Shavkat Mirziyoyev, government authorities, have been undertaking deep economic reforms, including reforms in the capital market. Current reforms let our country become competitive in Central Asia and accelerate privatization processes.
I can say that one of the recent crucial changes in Uzbekistan`s capital market was the fact that Government authorities has accepted the law allowing Limited Liability Companies to issue corporate bonds. It should be noted, that there are 150 thousand of LLC in Uzbekistan whilst only about 600 Public companies operates in Uzbekistan. We anticipate enhancing of debt market in Uzbekistan because till now, the credits from banks were the only source of getting financial sources, and very soon a big number of companies will be able to raise capital through issuing bonds.
Also, due to the fact that we have a low free float as 5 % in our exchange, Government authorities are planning to conduct IPO of the most famous state companies. The government are going to choose top 20 most well-known and popular companies to make their shares available for an unlimited number of people through IPOs. I think this also will contribute to the increase of free float, which leads to the growth of our market liquidity.
Armenuhy: Great! So you are not only working on the types of instruments but also the widening spread of the instruments that you have. Sometimes the markets in Uzbekistan and Kazakhstan are being compared, as being neighboring countries and sharing similar history, also both being members of FEAS. Are there any common initiatives between these countries and between Stock Exchanges?
Mr. Usmonov: I absolutely agree with you, I have also read many articles and hear a lot of opinions, which compared our markets. I have to mention that the economic reforms, which are going on in Uzbekistan have been already made in Kazakhstan about ten to fifteen years ago.
However, we had decisions about monetary policy, which should have a huge impact on the money and capital markets of Uzbekistan. The first and the most important step for starting the economic reforms was the decision of liberalization of monetary policy and devaluation of national currency. In reality, before the implementation of these reforms, there were two exchange rates in Uzbekistan. The first one was the official exchange rate, which was approximately two times lower than the real market rate, in consequence, the minor number of people was able to convert their money (their sums) to US dollars. The second one was the “black” market, which reflects the real situation in the market. Right now, there is no problem with exchanging Uzbek Soums foreign currencies and therefore interest of investors in Uzbekistan has been increased significantly. And, as I mentioned above, we must do a lot of work including accelerating privatization processes, development of capital market infrastructure, and improving the financial literacy of citizens.
Answering to your question, in comparison with Kazakhstan, our volume of market is quite small, but considering the fact that our languages, history, traditions, and even our laws are very similar, we are closely cooperating with KASE. Our employees are always in contact with each other and KASE always glad to share their experience. For example, we conduct an event “Day of the issuer” on a regular basis quite successfully. We implemented this type of event based on KASE experience.
In turn, we know that investors from Kazakhstan also follow us and we see their interest in our market.
Armenuhy: We love cooperation in FEAS as well, and we very much love cooperation between FEAS Members. Coming to the country and technology, on a global scale, where is your country standing in terms of adopting new technologies and new trends in the market?
Bekzod: Thank You for your question Armenuhy. Fintech industry in Uzbekistan has been developing very fast over the last years. For example, Georgian TBC Bank has come to Uzbekistan and become the first digital bank in our country. Also, our local commercial banks are doing great job on implementing new instruments in the banking sector. This pandemic, clearly demonstrates, that, technology is a key to success. Digital economies are much more flexible and ready to adapt to any changes. We can see the digitalization of so many businesses around the world and even take a certain number of benefits from these extraordinary conditions. Moreover, before the pandemic, Uzbekistan has already taken an initiative called “One Million Uzbek Coders” to teach and give knowledge for the young generation of Uzbekistan, to prepare local developers.
I can say one more time that our trading platform is very competitive in terms of technology. Transactions are being completed after the matching in milliseconds and all transactions are made without human interventions so as you see RSE “Toshkent” is in good condition.
Armenuhy: So we know now about the strategic things, we know about the instruments and technology. Now coming to the most sensitive part, as we are in a pandemic situation. How are you encouraging your employees to stay positive and to avoid negativity in the workplace?
Mr. Usmonov: I absolutely agree with you that, the whole world is facing challenges now. We also had passed a big wave of Covid-19 spread in Uzbekistan and the government had been announced strict quarantine rules till the first of August. 90% of employees of RSE “Toshkent” worked from home. To be honest, I think that we should adapt to new realities and learn how to keep work effectively-staying at home.
On the other hand, I am encouraging my employees to stay positive and take opportunities by staying at home. It is a chance for us to be with our family and spend a huge time with them.
And I have to mention that, how the Secretariat of FEAS is doing great job, conducting seminars and events in online format in the pandemic situation. I think, we should take an example from you, on how to keep efficiency in these times.
Armenuhy: Thank You. I am very glad that our activities are appreciated by our members. They are bringing the value to it! And the very last question Mr. Usmonov, in your personal opinion, what will life look like after COVID-19 pandemic? What are the major challenges that humanity will face in the near future?
Mr. Usmonov: In my opinion, we should learn how to quickly adapt in any condition, that we can have in the future and COVID-19 completely demonstrate it. After Covid-19 pandemic, undoubtedly, technologies will play a more significant role in our life. Now, we can see the transformation of whole industries online and exchanges should not be an exclusion. We should create a convenient infrastructure for investors to invest in securities, that are listed in our exchange, and for companies to raise capital in these extreme conditions.
Actually, it is not about social distancing but physical distancing because we can be in contact and conduct meetings with our partners through certain platforms like Zoom, Telegram, WhatsApp. Right now, cooperation could be an important key to success and if the whole world will face this kind of negative situation jointly, it will be much easier to solve these issues.
Armenuhy: Thank You very much for your positivity. Take Care, Stay Safe.
Mr. Usmonov: Thank You!