01.03.2010

The FINANCIAL -- “The majority of Georgian companies are not listed on the stock exchange. From around 150 companies listed on the Georgian Stock Exchange only 4-5 of them are more or less liquid,” says Giorgi Shengelia, BG Capital.

“The Georgian stock market is in the early stage of development - which gives a lot of possibilities to investors,” Shengelia says.

“Only a few names are traded on the GSE - Bank of Georgia, the only company in the Caucasus that has successfully listed its GDRs (Global Depositary Receipt) on the London Stock Exchange.”

“People’s Bank of Georgia– after a change of management the stock became more liquid, but still it is traded in thin volumes. There are some other relatively liquid names like Teliani Valley and Caucasus Energy and Infrastructure (Hydro energy fund),” says Shengelia.

“According to January 2010 data, average Georgian Stock Exchange daily turnover was 136,000 stocks per day and average weekly turnover - 326,500 stocks per week,” says Vakhtang Svanadze, General Director of the Georgian Stock Exchange.

According to the Georgian Stock Exchange the stocks of 146 companies are admitted for trading on GSE.

“Until the present there have been no preferred stocks on GSE. In general there have been few cases of issuing preferred stock in Georgia,” says Svanadze.

The nominal value of the common stocks varies from 0.01 GEL to 60 GEL. However, the nominal value of the majority of stock is mostly 1 GEL.

Issuing stocks is both profitable for companies and for future shareholders. Companies  issue stocks for fund raising, stakeholders get the share in the company and moreover, will have return on investment by dividends, or will just get profit in re-selling stocks when the value increases and the price they have paid per stock is greater.

“General awareness in the securities market is pretty low in Georgia in my opinion. Most of the Georgian investors are investing their savings in either bank deposits or as before the crisis, investing in real-estate”.

“Most of our clients are looking at both Georgian and international stock markets. Usually Georgian investors prefer well known, liquid names in emerging markets that have good growth opportunities. However the choice of where to invest depends on an investor’s needs, what kind of investment they are looking for.”

“Last year most Georgian investors traded in well known financial names like Citi Bank, Bank of America, JP Morgan, etc,” says Shengelia.

According to Svanadze the most traded stocks on GSE are the stock of Bank of Georgia and People’s Bank.

“At present there is an increasing interest towards investing in stocks.

Some issuers of common stocks pay dividends, others - do not. It depends on the decision of the General Meeting of Shareholders of the respective issuer,” says Svanadze.

“Usually, when companies are growing rapidly and need funds for future growth - shareholders prefer their companies to reinvest the profit rather than pay dividends. Since, Georgia is a fast growing country - most Georgian companies reinvest their profit,” says Shengelia.

“As a rule, companies issue stock for fund-raising. For instance, recently People’s bank issued new stocks with this purpose,” says Svanadze.

“Many company founders prefer to privately own their companies, which in my opinion is not the right approach in most cases. Many would agree with me that it’s better to own a medium size stake in a great company, rather than a controlling stake in a mediocre one,” says Shengelia.

“BG capital is really trying to increase general understanding of how this business works. Last year we held a capital markets day for local investors along with Bank of Georgia Wealth Management.”

The biggest IPO (initial public offering) ever done in Georgia was executed by BG Capital in February 2008. We raised 50 million USD (0.5% of GDP at the time) for an energy fund - Caucasus Energy and Infrastructures.

The latest placement was the Georgian Railway bond issuance worth 25 million GEL on the local market - also executed by BG Capital,” he adds.

Bank of Georgia, the only company that trades with its shares in the global market has around 31 million shares outstanding and the price is in the range of 9.90 USD - 10.00 USD.
 
“The economic crisis had a serious impact on the Georgian Stock market. For example before the crisis Bank of Georgia GDRs were traded at around 40 USD, during the crisis in 2008 stock’s lowest price was 1.60 USD, currently it is traded at around 10.00 USD,” says Shengelia.

“During the economic crisis the prices of stocks decreased in Georgia as everywhere else. It is difficult to make predictions for the year 2010, as it depends on the global, regional and local political and economic situation,” says Svanadze.

“To trade on the GSE, one needs to contact a brokerage house and set up an account. Only licensed brokers are able to trade on the GSE. Trading days are only Monday, Wednesday and Friday on the Georgian Stock Exchange,” says Shengelia.

“For those companies who would like to issue stocks they must go through the legal process of approval of the issued Prospectus by the securities market regulator - currently National Bank of Georgia,” says Svanadze.

Source: www.financial.ge