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Azerbaijan gets another chance

The birth of Azerbaijan’s capital markets has been continually predicted, but has never come to pass. Now a tiny IPO is raising renewed hopes of access to one of the richest frontier markets. Will this time be different?

Even by the standards of the Caucasus, a region not noted for its booming equity markets, this month’s planned IPO of Azerbaijani online payments company GoldenPay is expected to be tiny. The total deal size is unlikely to top $10 million, and most of the shares are tipped to be taken by Baku’s younger retail investors, attracted by the prospect of buying into a home-grown tech story.

For local market participants in Azerbaijan, however, the offering has acquired a significance out of all proportion to its size. In the 14 years since its foundation, Baku’s post-Soviet stock exchange has yet to witness a single IPO; hopes are running high that a successful issue from GoldenPay might inspire larger Azerbaijani corporates to access local equity markets.

Similar enthusiasm was engendered by reports in December that the Azerbaijani government had picked banks to manage an inaugural dollar-bond issue. The lack of a sovereign bond to provide a pricing benchmark has long been seen as a barrier to international market access for other Azerbaijani borrowers, so the prospect of an imminent deal raises hopes of a fresh wave of Eurobond issuance from the country.

Add in a recent announcement by the State Committee for Securities that it is on the verge of expanding Azerbaijan’s limited domestic institutional investor base by licensing the country’s first investment fund, and it is easy to see why optimists are predicting that 2014 might finally be when Azerbaijan’s moribund capital markets come to life.

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