On June 15th TBC Capital presented the research report on “Fixed Income Securities in Georgia”. The report describes the Bond Market in Georgia and discusses its future development trends.
According to the report, the treasury securities market is well developed in the country. On the other hand corporate fixed income securities market is on early stage of development. The bond market experienced tangible progress since 2014, when NBG launched the new regulation, enabling the commercial banks to provide local publicly placed bonds as collateral for NBG loans. Despite the impressive growth over the last 3 years, publicly issued bonds outstanding was only GEL 232m at YE 2017. Market capitalization of corporate bond market in Georgia is 0.6% of GDP, much less than that of the selected peers.
The report also discusses the supporting factors for the bond market development, including tax breaks, expected increase of corporate governance and transparency and improved regulations on the market. According to TBC capital team, the pension reform will further foster the corporate bond market development. Based on TBC Capital’s assumptions it is expected that approximately 4% of pension assets will be invested in local corporate bonds and during the medium-term the outstanding corporate bonds are expected to grow to GEL 1bn.
“Corporate bond is a relatively new product on Georgian financial market. There are various key factors, including tax breaks and National Bank of Georgia’s pledge rules, which play the pivotal role in supporting the corporate fixed income market development in Georgia. Corporate bond market is in development stage and we believe that more local corporations will consider financing their business activities via issuing the corporate bonds. The increased appetite from the corporations for bond financing is already prominent. Additionally, we believe that pension reform will play significant role in market development, creating the additional long-term GEL supply on the market.” – says Irakli Elashvili, TBC Capital’s Managing Director.
Business forum, organized by TBC capital, was attended by representatives of public and private sectors. Scope Ratings GmbH – international rating agency, held the presentation on corporate bond ratings process. By the end of the business forum, TBC Capital, National Bank of Georgia, Georgian Stock Exchange, JSC Silknet, BLC Law Office, Scope Ratings and ISET held the panel discussion on challenges and opportunities within the fixed income securities market in Georgia.
The report will be published on the following link: www.tbcresearch.ge
TBC Capital is TBC Bank’s wholly-owned investment banking subsidiary and licensed brokerage firm. In 2017 TBC Capital became an integral part of TBC Bank’s Corporate and Investment Banking franchise. Its main lines of business include corporate finance and credit rating advisory, debt and equity capital markets, brokerage, and private research. TBC Capital is also a shareholder in the Georgian Stock Exchange and plays an active role in the development of its infrastructure.