The Chairman of the Management Board of OJSC “Keremet Bank”, Toktogul Rysbek: “On the opportunities opened by the Kyrgyz Stock Exchange for issuers and investors”
The Chairman of the Management Board of OJSC “Keremet Bank”, Toktogul Rysbek gave an exclusive interview, in which shared his knowledge and experience, having talked about the opportunities and instruments opened by the Kyrgyz Stock Exchange (KSE).
The economy of the country is gradually recovering from the coronavirus stagnation, and the owners of free capital again have a choice – where it is better to invest funds. The most popular among private investors are bank deposits and real estate, but it is worth noting that these means can be supplemented with the stock market instruments for improving the quality of the investment portfolio. The Chairman of the Management Board of OJSC “Keremet Bank”, Toktogul Rysbek as a Head of the Executive Body of one of the largest participants in the stock market shared his experience, having talked about the opportunities opened by the Kyrgyz Stock Exchange (KSE): both for issuers and investors.
- What was the goal of “Keremet Bank” while entering the stock market? What pluses or advantages can you point out?
- Our goal was to attract additional investments for the further development of the bank. The bank issued shares, having offered potential buyers through KSE to become the co-owners of the bank and obtain the right to vote and the right to profit (dividends). It seems to me that this is a positive trend, that deserves attention and should be developed. “Keremet Bank”, as a public company unambiguously considers its presence in the stock market to be an advantage. In full compliance with the requirements of the legislation on the securities market of the Kyrgyz Republic, we increase the level of trust of the existing and potential investors. Although the degree of the capitalization of the domestic stock market differs from the countries with developed economies, joint-stock ownership is one of the popular among the largest companies, seeking transparency and accountability.
As for advantages, it can be noted the following:
- high requirements to the transparency and disclosure of the issuer’s activities on the stock exchange website;
- the security of transactions on the stock market by guaranteeing payments;
- access to equity and debt financing without providing collateral in the form of collateral, guarantees, and other types of collateral;
- tax preferences for investors (individuals and legal entities - residents) through full exemption from withholding tax and income tax - dividends, interest rates and increase in the value of securities in the highest listing category;
- high requirements to the listing of securities of the Listing Committee of the Stock Exchange;
- attraction of potential clients and interested parties through information disclosure by the issuer;
- listing and stock exchange experience.
- There are many advantages, but are there any disadvantages?
- There are fewer disadvantages. But while our market is local, the disadvantages that do not allow large cash flows to enter here now create interesting opportunities for private investors. If we look at it from the point of view of return on investment, then by nature of equity capital, including some local companies is a more attractive instrument.
In addition to the indicated weak financial literacy, as for disadvantages, I can note the following:
- absence of a sufficient number of institutional investors (non-state pension funds, insurance companies, investment funds, and others) and other qualified investors for activation of the stock exchange activities;
- a limited range of financial instruments offered on the stock exchange;
- low international and regional integration;
- tangible commission payments by professional participants for the issue of securities, which reduce the declared yield of the issuer.
- Your bank was one of the first to enter the stock market. Why do you think there are so few commercial banks on the stock market?
- I can assume that there is still mistrust among many potential participants in the stock market. Also affected by the low financial literacy, and sometimes a banal lack of information. I cannot say unequivocally that there are few commercial banks since the IPO of all commercial banks takes place on the stock market. The question is rather related to the secondary market. The secondary market depends on the ownership strategy of the owner and the availability of institutional and other qualified investors. Today, some banks periodically place corporate bonds.
- What financial instruments of the stock market do you consider acceptable for attracting investments?
- We have already mentioned the activation of the corporate bonds market, which is encouraging. Investors have a choice between traditional fixed-term bank deposits and corporate bonds, issuers have a choice between traditional bank loans and bond financing. The issuance of the corporate bonds is also profitable for the commercial banks in comparison with deposits, as corporate bonds are not included in the calculation of the mandatory reserve requirements and unlike deposits are not subject to issuance at the first request of a client, thereby being a more stable and predictable financial instrument.
- What are your recommendations as an investor and a KSE issuer?
- The stock market is changing: in the field of investment, a new type of client from the mass segment is increasingly encountered – private investors from former bank depositors without special knowledge. Such client should be financially educated about the stock market and trained in a language that he/she understands. For the interest of large international investors, it is necessary to improve infrastructure, constantly working on improvement of the legislative basis, and increase the level of attractiveness of objects for investment through changing the approaches to the quality of the corporate governance of the public companies.
Important:
- promote the principle of the usefulness of the stock market for investors and issuers listing the benefits for the future and current issuers;
- organize pilot projects with new financial instruments such as futures, options, derivative, and hybrid instruments;
- adapt international experience and implement an electronic depository of corporate reporting similar to SEDAR in Canada and EDGAR in the USA as well as the implementation of the requirements of the Sarbanes-Oxley Act, SOX, and ESG principles (Environment. Social and Governance, Environment, Social Responsibility and Good Corporate Governance).