The growth of liquidity in the banking system of Armenia helped the dramatic increase in the demand for bonds—both state and corporate, General Director of Nasdaq OMX Armenia, Konstantin Saroyan, told Armenian News – NEWS.am.
To alleviate the monetary conditions in Armenia, the Central Bank of Armenia (CBA) lowered the refinancing rate from 10.5 to 6 percent within the period from August 2015 to March 2017. This helped the introduction of liquidity into the banking system. But the banks were careful with credit granting in the conditions of economic instability and thus directed significant part of the liquidity into bonds.
This way, in 2015 the credit granting reduced by 2.9 percent, growing by 15.5 percent in 2016. However, the growth picked up pace only in the last quarter of 2016.
Together with this, the exponential growth of bonds (partly due to low absolute volumes, but also thanks to new demand of banks) continued in 2016.
In Saroyan’ words, the demand is growing both for bank and non-bank bonds. Several emissions—mainly those of banks—have already taken place since the beginning of the year. The lowering of the obligatory reserve rate for funds attracted from stock exchanges served as another incentive for them. During an emission on an international stock exchange, the rate falls from 20 percent to zero, while on the Armenian one (Nasdaq OMX Armenia) - up to 5-10 percent.
Consequently, bond transactions have grown several times in the local market.
According to the statistics of Nasdaq OMX Armenia, the trading in 2016 grew record high. The growth of trading of corporate bonds was observed almost in all months of 2016, including by 5.8 times in November and 8.6 times in December. Similar rate was observed in case of state bonds.
As a result, the bond rates slightly dropped, the issuance becoming more frequent.
If the work on stock exchange has become a routine for banks, the real sector has not yet got used to it.
But there are a lot of companies, which undergo independent audit and have lawyers, Saroyan stressed. “Besides, it should be noted that the requirements for the listing are not that tough. It is necessary to prepare the prospectus for bond issue, but the package of documents required for it is standard. We familiarize interested people with these samples and use them for consultation,” Saroyan said.
