Security is share, which actually guarantees the investor’s money reimbursement together with the relevant interests. Till now there were only governmental bonds in the Armenian market. And now they try to develop corporative market in Armenia. “Armeconombank” is going to issue 20k securities with 10k dram nominal value for each. These short-term securities with 6% interest rate are going to be covered on December 14, 2006. The trade deals of these securities will be carried out in the Armenian stock-market, and the purchasers will have a right for property on these securities as soon as they are registered in the Central Depository of Armenia.
According to Ashot Osipyan (“Armeconombank” executive director) there will be no problem in connection with the issuance of these securities in the primary market. This means that investing company “Tonton” will buy all the issued securities. Here the problem is the secondary market, i.e. the demand for these securities by investors. A.Osipyan assured that they need this new instrument seriously, but they had managed the value and the capacity of issuance on the base of their preliminary demand analysis.
The issuance also has preparative purposes. “If the secondary market develops well, we will issue also long-term and mortgage securities,” said A.Osipyan. According to him because of the lack of these kinds of financial instruments they had to issue short term securities in order “to feel” the market potential. By the way, he also informed that this issuance would be carried out with the help of their international donors, but he didn’t inform anything about those donors.
The main privilege of these corporative securities in comparison with bank deposits is liquidity.
If someone has invested in these securities and wants to take his money back sooner than the covering date, he will not be able to get the interest rate he could get in case of not doing so. Investors can also sell their securities in the secondary market whenever they want without losing. Investors are interested in whether these securities are secure or not. According to the RA law “About physical person’s bank deposits reimbursement” securities and other deposits are to be guaranteed to compensate by the reimbursement guaranteeing foundation.
This issuance is supported by the USAID “RA stock market development” project. Head of this project Donald Hart says that there is no developed stock market in Armenia, all professional broker organizations and the stock market must create good conditions so the investors in this system understand the importance of this instrument. Deputy head of this program Samvel Mkhitaryan is sure that this security issuance will be the beginning of the Armenian financial market development.
During our conversation with Mr.Osipyan he said that they were late and they could develop the Armenian stock market before too.
Although today “Armeconombank” is the only one to issue corporative securities, A.Osipyan says that they will be happy to see other trading banks in this market too. “Our goal is to recruit local investors, but not to make strong competition”, says Mr.Osipyan. By the way, he also says that they’d like to increase the interest rates, but can’t do that now. Though this 6% interest rate is more “Attractive” than the 4% of the governmental bonds interest rate, A.Osipyan says that this corporative security market with a 200 million dram capacity can’t be a serious competitor for the governmental market.