Uzbekistan is in need of a single and, most importantly, transparent financial market regulator, an international conference held in Tashkent by the country’s Capital Market Development Agency (CMDA) heard.

When it comes to raising money to launch a business, an ordinary entrepreneur in Uzbekistan typically considers one route only: getting a loan. The idea of using the stock market, though widespread around the world, to them seems exotic. The amount of shares available on the stock market of Uzbekistan is currently equivalent to 6% of GDP, whereas in Singapore the ratio is 188%, in Malaysia it is 112% and in Russia it is 34%.

At the conference, titled "The role of the financial market in stimulating economic growth. Legal and Institutional Aspects”, Elad Roisman, commissioner of the US Securities and Exchange Commission (SEC), said the American side stood ready to help Uzbekistan achieve its capital market goals. He added that it was necessary to strengthen the role of the bourse regulator, its powers and independence, and consolidate all components of the Uzbek financial markets following examples set by other countries.

“It is important for investors to obtain fast, transparent and reliable data,” Roisman said.

2020 data on Tashkent Stock Exchange.

The volume of trades on the Tashkent Stock Exchange reached an all-time high in 2020 of $55mn, up 31.7% y/y. The exchange, which saw its first-ever initial public offering (IPO) in 2017—when 54% of 4.5mn shares offered in Uzbek glass manufacturer Quartz were sold, raising $712,000—hopes to see the flotation of sole domestic automaker UzAuto Motors, which makes Chevrolet cars, in the not-too-distant future.

Single, strong and integrated

CMDA head Atabek Nazirov said Uzbekistan should strive for a single, strong and integrated bourse. This, according to him, would eradicate barriers in bringing investors to Uzbekistan and privatising the best companies.

Nazirov told bne IntelliNews: “To attract foreign investors, from the perspective of capital markets we talk about portfolio investors. These are large funds that are well-known all over the world. They own hundreds of trillions of dollars. They own and manage shares of the largest companies in the world. We can raise these sources for Uzbekistan through the capital market.

“To do so we must improve the standards of our exchange management and create liquidity. And we have to get into the indexes. The MSCI for example. The requirements for it are not so complicated. We just need to bring two companies with a capitalisation of about one billion dollars to our stock exchange. Such companies, to our great joy, are already on our stock exchange. For example, Almalyk Mining and Mettalurgy Combine. It is already listed.”

Karen Srapionov, a partner of Avesta Investment Group, said: “Too many questions have arisen during the past years in our professional community. First of all, they are related to legislation and the normative sphere. Too many collusive norms contradict each other. There is no common development strategy for the financial markets. This causes intransparency and distrust from local and foreign investors. Everybody wants to invest but nobody sees the simple way to do so. There is no opportunity for collective investments and jurisdiction on funds and management companies.”

Grigory Marchenko, advisor to the chairman of the board of the Eurasian Development Bank (EDB), in his address to the conference recommended that Uzbekistan reform its banking system, close all unstable banks and only depend on lenders that operate in accordance with world standards accountability and function like commercial banks.