Capital Market Development in Georgia. George Paresishvili CEO Georgian Stock Exchange

Transcription

1 Capital Market Development in Georgia George Paresishvili CEO Georgian Stock Exchange

2 GEORGIA AT A GLANCE General Facts Area: 69,700 sq. km Population (2017): 3.7 Mn Life expectancy: 77 years Official Language: Georgian Literacy: 100% Capital: Tbilisi Currency Currency: Georgian Lari (GEL) Exchange rates(18 Apr, 2018): USD/GEL: 2.43; EUR/GEL: 3.00 Managed float; Fully convertible Recent achievements #7 in Enforcing Contracts**** #2 in Protecting Minority Investors**** #13 in Index of Economic Freedom***** From #8 to #4 on Starting a Business**** Among the friendliest Tax Regime globally*** From #16 to #9 globally on Ease of Doing Business**** Economy GDP (FY 2017): USD 15.2 bln* GDP per capita** (FY 2017): USD 10.6k Average real GDP growth ( ): 4.6% 2017 Real GDP Growth (YoY): 5.0%* Annual inflation (e-o-p) 2017: 6.7% Public external debt to GDP 2017: 34.9%* Ratings Fitch : BB-/Positive Standard & Poor's: BB-/Stable Moody's: Ba2/Stable Source: Geostat; ; Rating Agencies (*) Geostat, National Bank of Georgia (**) at PPP, IMF (***) 22th globally on Paying Taxes, WB, doing business report 2018; (****) Doing Business Report 2018; (*****) The Heritage Foundation and The Wall Street Journal; 2

3 GEORGIA AT A GLANCE, CONT`D GDP development % % % % 8% 6.4% 5.5% 4.6% 4.9% 5% 3.4% 2.3% 6.2% 2.8% 3.0% 2.0% 2% 2.4% 2.9% 2.0% 1.8% 6,7% 5,0% -1% -1.4% -4% -3.8% Nominal GDP (USD bln) Real GDP growth rate (%) Inflation as of period end (YoY) GDP composition (2017) Wholesale, retail trade (18%) Manufacturing (16%) Transport and Comm. (10%) Construction (9%) Agriculture (8%) Public administration (8%) Health and social work (6%) Real estate (7%) Other sectors (5%) Financial intermediation (4%) Education (5%) Hotels and restaurants (3%) Source: Geostat Source: Geostat GDP per capita % Real GDP growth projection, % 3.7% 3.5% 3.5% 3.2% 3.3% 2.9% 3.9% 4.2% 4.4% % Nominal GDP per capita, US$ GDP per capita, PPP, US$ Russia Czech Republic Armenia Ukraine Poland Lithuania Turkey Moldova Estonia Latvia Georgia Romania Source: IMF, Geostat Source: IMF, October

4 GEORGIA AT A GLANCE, CONT`D 19% 16% 13% 10% 7% 4% FDI and capital goods import 1,818 1,862 1,653 1,570 1, % 1,130 12,3% 1,023 1, % 10.7% 11.0% % 7.0% 6.1% 8.4% 7.0% 9.1% 7.9% 5.8% 8.5% 7.6% 7.7% 5.9% 6,7% 5.9% 6.0% Tourism 6,361 5,901 5,392 5,516 4, % 6.80% 6.90% 6.20% 6.10% 6.30% 6.10% 6.30% 5.80% 5.90% 2,822 2,751 2,032 2,166 1,720 1,787 1,936 1,290 1,500 1, ,556 Source: GeoStat FDI, US$ mln FDI to GDP, % Capital goods imports to GDP, % Foreign visitors (K persons) Revenues from incoming tourism, US$ mln Share of tourism in GDP (%) Source: Georgian National Tourism Agency 27.8% Government Bonds 196 Current account balance (% of nominal GDP) % ,422 1, % 2.4% 2.3% 161 2,381 2, % 7.6% -10.6% -10.3% -12.8% -11.7% -5.8% -10.7% -12.0% -12.8% -8.7% * -22.0% Government bonds owned by residents Government bonds owned non-by residents CA deficit Share in total portfolio, % Source: Source: 4

5 STRUCTURAL REFORMS & REGULATORY CHANGES Structural reforms Pension Reform: Pillar II System Tax Reform Capital Market Reform No capital gain or interest income tax on listed securities Corporate income tax deferral (Estonian Model) Enhancing easiness of tax compliance Development strategy approved by the government Developing of local bond market: Rating agencies, REPO, New Issues, Clearstream MiFID adoption; Market infrastructure upgrade New accounting & audit supervisory body established Pension reform design (current proposal): Mandatory for every formally employed person under age of 40 Employees contribute 2% from their monthly salary to their individual pension account Employers match this contribution by another 2% Government matches with additional 2% contribution Thus total monthly contribution will be 6% of employee s gross salary Source: Ministry of Economy and Sustainable Development of Georgia Estimated accumulation of pension fund assets, GEL mln 26,034 29,702 Accounting Reform Legislative Reform Companies are required to publish annual reports according to IFRS and Management Reports Corporate Governance standards are improving Law on Entrepreneurs and Securities Market Law amended: Independent board members and audit committee Disclosure requirements for related party transactions and management compensation 22,694 19,661 16,916 14,443 12,225 10,244 8,487 6,938 5,583 4,407 3, ,200 1,804 2,531 Source: Ministry of Finance of Georgia, Ministry of Economy and Sustainable Development Protection of minority investors Significant funding source for domestic economy through debt and equity issuances (long-term GEL funding, dedollarization) 5

6 BOND MARKET USD Denominated bonds GEL Denominated bonds 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% Nikora 9.0% M2 5.5% GLC 6.5% Silknet 8.5% GOGC 5.2% Georgia 3.9% GRAIL 5.2% BGEO 5.7% GEOCAP 6.7% Remaining maturity Source: G&T, GSE 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% Remaining maturity GEL Sovereign Yield Curve Source:, GSE Eurobonds Corporate IFI issues GoG GOGC GRAIL BGEO BOG EBRD III GLC GEOCAP m2 Real Estate Nikora Silknet GWP Silknet Finca Bank MFO Crystal EBRD II EBRD I ADB BSTDB III IFC BSTDB I BSTDB II Issue Size 500 mln 250 mln 500 mln 350 mln 500 mln 120 mln 10 mln 300 mln 25 mln 10mln 10 mln 30 mln 34 mln 20 mln 10 mln 135 mln 107 mln 64 mln 25 mln 108.ln 48 mln 60 mln Currency USD USD USD USD GEL GEL USD USD USD USD USD GEL GEL GEL GEL GEL GEL GEL GEL GEL GEL GEL Issue Date Apr-11 Apr-16 Jul-12 Jul-16 Jun-17 Apr-17 Aug-17 Mar-18 Oct-16 Jun-17 Mar-18 Dec-16 Aug-17 Jun-15 Dec-17 Dec-17 Jun-16 Jul-16 Mar-18 Jun-17 Nov-15 Aug-16 Tenor 10 Y 5 Y 10 Y 7 Y 3 Y 5 Y 3 Y 6 Y 3 Y 2 Y 3 Y 5 Y 5 Y 3 Y 2 Y 5 Y 5 Y 3 Y 3 Y 3 Y 3 Y 5 Y Coupon Fixed Fixed Fixed Fixed Fixed Floating Fixed Fixed Fixed Fixed Fixed Floating Floating Fixed Floating Floating Floating Floating Floating Fixed Floating Floating Issuer rating Fitch/S&P/ Moody s/scope BB-/BB- /Ba3 BB-/B+/- B+/B+/- BB-/-/B1 BB-/-/Ba3 AAA - B2/B+ - BB - BB- B+ - B AAA AAA AAA A2/A- AAA A2/A- A2/A- Coupon Rate 6.88% 6.75% 7.75% 6.0% 11.0% 7.0% 6.375% 7.5% 9.0% 8.5% Listed on LSE LSE LSE LSE LSE LSE GSE - GSE GSE - - GSE GSE - GSE Ref Rate + 3.5% Ref Rate + 3.5% 10.1% Ref Rate + 4.5% + 20 bps 7.99% 6

7 NEW CLEARING AND SETTLEMENT SYSTEM New system advantages Advantage Impact Clearing and settlement in Central Bank s money Higher speed, lower operational risks and costs Better access to secondary market by institutional investors (including pension and mutual funds) Institutional investors will be able to trade and hold government securities through GSE and GCSD, thus increasing liquidity of government bond market; DMA and commercial banks will be able to electronically conduct REPO operations using rated corporate bonds; Securities lending and borrowing becomes available Corporate bonds will be accepted as collateral electronically, directly from market participants (banks, brokers, pension funds) in semi-automated manner Reduced counterparty risk Reduced counterparty risk for OTC trades as settlements will take place in DVP (Delivery vs Payment) mode Access to foreign investors Foreign investors will be able to hold Georgian corporate securities through Clearstream. This will increase demand for Georgian securities and improve market liquidity 7

8 EQUITY LISTINGS AND THE PIPELINE Share price Currency MCap, mln 1 Y Return P/B P/E BGEO 34,4 GBP ,29% 1,83 10,73 International TBC 18,0 GBP ,84% 1,77 9,27 GHG 3,1 GBP ,28% 2,8 47,04 Local Liberty Bank 0,035 GEL ,75% 0,75 3,05 Teliani Valley 0,240 GEL ,50% 6,90-8,76 Source: Bloomberg, GSE Expected listings Year International Local Stock Exchange Wind farm 2018 x GSE Supermarket chain/fmcg 2018 x GSE Real Estate/Hospitality 2018 x GSE Large utility 2020 NA NA NA Source: GSE 8

9 Thank you