Market participants are confident that Scandinavian exchange operator OMX’s acquisition of the Armenian Stock Exchange (Armex) will help to boost interest in the Caucasian republic’s burgeoning capital markets in 2008.
As of the start of January, OMX assumed control of 100% of the shares of Armex and the Central Depository of Armenia, following an initial agreement signed at the end of April.
Magnus Böcker, OMXs chief executive, says: "The rapid economic growth in Armenia, as well as the good cooperation between OMX and the government and Central Bank of Armenia, give us confidence in the long-term growth potential of the Armenian market."
The Armenian authorities have warmly greeted OMXs acquisition. "The government of Armenia considers capital market development a key success factor for the further growth of the economy, and we are truly committed to working with OMX to achieve our ambitious joint goals," says prime minister Serzh Sargsyan.
Tigran Sargsyan, governor of the Central Bank of Armenia, believes that the entry of OMX into the Armenian market will encourage the development of the domestic securities industry and will improve the opportunities for Armenian companies to raise capital from domestic and international investors.
Arsen Kyurinyan, analyst at local brokerage Tonton Investment Company in the Armenian capital Yerevan, says that the announcement of the takeover has already boosted interest in Armenian shares. "We have already seen increased demand for shares on the back of the news about OMX buying the exchange," he says, adding that it is probable that there will be more new issue activity on the equity front in 2008 as a result of the Armenian bourses increased profile. As well as growth in the number of share offerings, Kyurinyan believes that there will be increased bond issuance. In 2007 there was a marked rise in debt offerings, with such companies as building materials concern Shen Concern, gas importer ArmRusgazprom, food and retail conglomerate Valetta and copper miner ACP all launching bonds. Harutyan Ghazaryan, head of asset management at investment boutique ArmSwissBank, says that OMX has already had a positive effect on the market by submitting recommendations to the Armenian authorities with regard to the drafting of a new securities law, which will come into force at the end of February. The new law will bring securities legislation more into line with the regulations in the European Union.
"The entry of OMX into Armenia will also help to accelerate the pace of market development as they have committed to educating potential issuers and investors about the market," says Ghazaryan. He adds that ArmSwissBank is looking to cooperate with OMX on the drafting of new legislation, which will enable the establishment of investment funds.