YEREVAN, October 28, /ARKA/. The development of domestic capital markets is a priority in the region. This reflects not only the reduction of vulnerability of capital flows but also the necessity to strengthen the resilience of financial markets in general, said the Chairman of the Central Bank of Armenia Martin Galstyan during a webinar based on the materials of the new IMF report titled Regional Economic Outlook: Middle East and Central Asia.
‘The three main components I would like to mention here are expanding the investor base – both local and foreign, expanding the pool of instruments available and the third is encouraging large companies to adopt high standards of corporate governance and eventually obtaining international ratings. Local investor base, especially institutional investors like pension funds play a center role in this respect by providing stable source of financing.
By the way, assets under management of pension funds will reach almost $1 billion dollars at the end of this year in Armenia. Some 10% are invested in corporate market instruments at this point. Foreign investors are important because they deepen and diversify the pool of capital available for domestic financing, increase competition to the benefits of domestic issuers and finally improve transparency and governance of domestic companies.
Advanced clearing and settlement infrastructure is also critical. Efficient functioning of capital markets requires also sophisticated financial products, such as hedging instruments. The variety of derivative instruments is an important prerequisite for attracting foreign capital to the domestic capital market.
This is an important priority to facilitate the entrance of foreign investors and expand the investors’ base. At the same time domestic institutional investments such as pension funds will greatly benefit from bigger pool of instruments while contributing to financing of long term large products.
Next important priority is setting best corporate governance standards of companies with international ratings for corporates to facilitate their access to capital markets. Our recent experience shows that consistent action brings about the desire result.
After long discussions some large private sector companies have already initiated rating and enter capital market with success. While countries might prioritize different components I strongly believe that companies with coordinated process of parallel development and well designed agenda and regulation and supervision have the highest potential to succeed.’ -0-
