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Armenian market preparing to appear before world jt. stock community

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  • Armenian market preparing to appear before world jt. stock community

    The Armenian market is preparing to appear before the world joint stock
    community


    Interview by Emmanuil Lazarian, ArmInfo, 04.05.2008

    2008-05-04 13:45:00


    The placement of the Armenian Stock Exchange (Armex) and the Central
    Depositary of Armenia (CDA) under the auspices of the
    American-Scandinavian stock exchange operator, NASDAQ OMX, was the key
    event for the Armenian financial market participants last year. The
    initiator of the deal, the Central Bank of Armenia, perfectly realized
    that the market needed a push. So, it decided to usher the local
    capital market into a new `commercially-oriented' phase of development.
    The market has rejected its `spoke-in-the-wheel' self-regulation
    principle and is looking forward to new work style under the world
    renowned brand and most advanced technologies. The coordinator of the
    reforms at Armex and CDA, representative of NASDAQ OMX Johan Fredholm
    has told an ArmInfo correspondent about the development plans of the
    market.

    - Mr.Fredholm, as far as I know, your work in Armenia is part of your
    policy on Eastern Europe and the Caucasus. NASDAQ OMX has obtained a
    stake in the IXSP (International Exchange St.Petersburg) and is
    negotiating for entering the market of our neighbor, Georgia?

    - We are interested in expanding in Eastern Europe, in general. We are
    talking to different stakeholders in many different markets and Georgia
    is one of them.

    In Armenia, we are actively reforming the market: there have been
    changes to the charter of the companies Armex and CDA to transform them
    into open joint stock companies. Now further changes are required
    because of the new securities law: Armex and CDA have to submit new
    rules before the end of June this year. But most importantly we will
    improve the way Armex and CDA work, and work with other stakeholders to
    develop the market.

    - Are you planning changes in the listing and trading rules?


    - We will develop them over time. For us it is very important that the
    rules are adapted to the market development level and as the market
    develops the rules will also be changed, but it is not possible to use
    exactly the same rules in Armenia as in the Untied States or in Sweden.
    We will review the rules many times and will make sure that they suit
    the market at any given time.

    The important thing is that this will make it possible for
    international investors to invest in Armenia. For them, the most
    important thing is that they trust the companies they invest in and
    they trust the stock market they invest in. NASDAQ OMX will improve the
    processes, enforce the rules and make sure that Armex and CDA are
    trusted and work just as any other NASDAQ OMX company anywhere in the
    world, . We will also have high requirements on the companies that list
    here - they have to be transparent and provide good information. We
    also have to make it easy for foreigners to invest from technology
    point of view and from rules point of view

    - What do you think, is the Armenian market attractive for foreign
    investors?

    - Already today there are lots of foreigners who are prepared to invest
    in Armenia, but the big problem is actually that there are not enough
    transparent, interesting companies with enough shares available to buy
    on the stock exchange. Today, brokers have foreign investors who want
    to buy shares but there is nothing to buy.


    There are lots of foreign funds and other investors who specialize in
    Eastern Europe. They are interested in finding investments here but
    they cannot find shares to invest in.

    An interesting example is IXSP (International Exchange
    St.Petersburg)where we own a 33.3% stake. To a large extent, the same
    kind of investors are interested in investing in Russia through IXSP
    and in Armenia through Armex. The similarity between these two projects
    is that there is trust in NASDAQ OMX and in what we do. We create good
    markets where we operate and therefore we are interesting for listing
    companies and for investors.


    - How tough will your listing requirements be? I think they must be
    tough lest investors might face unjustified risks?

    - We will have high requirements for listing. In fact, we already have
    different levels of listing, but unfortunately, today there are no Ð?
    listed companies (with the toughest listing requirements). We will have
    high requirements and it will also be in the interest of the issuers:
    if you have high requirements and provide good information the
    investors trust the company and will pay more for its shares. This is
    the way we do listing, not just B or C listing but A listing with
    highest requirements. It will give the issuers the highest price for
    their shares. We will encourage them to do that and we will help them
    to comply with these high requirements and this will make it much
    easier for them to attract foreign capital.

    - Quite recently you introduced a new investment instrument ` corporate
    bonds. But the trade in these bonds is not very active. Why?


    - Last year was very positive. We got bonds of five companies. Before
    that we had zero. So, in that way it has been positive growth. Of
    course, I hope there will be more bond issues. I also hope that the
    companies issuing bonds will take the next step and issue shares. From
    volume prospective and the stock exchange perspective, there is usually
    much more activity in trading in shares than in bonds. Especially for
    foreigners, investing in shares is much more interesting than in bonds
    and there is much more capital to be found if you list shares.

    - Are you satisfied with the clearing and settlement system?

    - We are going to improve clearing and settlement as now it is too
    complicated and will discourage investors and make the activity lower.

    We will develop it first by improving the rules. We will then also use
    technology solutions to make improvements. We will do all this. We are
    right now planning exactly when and how we will do it. It is important
    to improve the functions of the depository and the clearing settlement
    process.

    We have to move from pre-deposition to T+3 settlement, which is the way
    we work on other NASDAQ OMX markets. This will be important.

    - When will our market be ready for attracting investments?

    From our side, we will do everything we can to improve the exchange and
    depository. We also need companies who are prepared to list, and
    release more shares and not only trade a very small percentage. There
    are already companies who want to raise capital on the exchange. When
    they do that we will help them with the listing procedures. We will do
    what we can to help and convince them that it is a good idea.

    - Will the currency exchange remain under the control of the Central
    Bank?


    - I cannot answer for the Central Bank. Of course, they are controlling
    this sphere. What we can do is to make sure that we provide good
    platform for currency trading, which is working well already now, and
    we can provide a good platform for securities trading, and we think
    investors will want to use that platform. The CB sees that it is useful
    for the market and we make sure that the services we provide to the
    market are working well
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