Bonds of SOCAR enjoy high popularity

By Azernews

By Nigar Abbasova

Bonds of Azerbaijan’s energy giant SOCAR, issued for the domestic market of the country, have gained a big popularity and recorded strong demand within a short period of time.

The demand for bonds, the nominal value of which is $1,000, has exceeded the supply twofold, while vast majority of applications for the purchase of bonds accounted for individuals.

SOCAR’s head Rovnag Abdullayev said that some 90 percent of all applications fell to a share of individuals, while banks and other legal entities accounted only for 10 percent of applications. He made the remark, while addressing an event dedicated to the launch of a sale of SOCAR’s bonds on the secondary market of Baku Stock Exchange.

Applications worth some $203,604 million were accepted by relevant institutes, while the total worth of obligations issued by SOCAR amounts to $100 million.  

The annual interest rate on SOCAR’s bonds stands at the level of 5 percent. The figure is higher than the rates applied in reference to dollar deposits placed in banks, where the annual interest rate on dollar deposits currently stands at 2.5-3 percent.

The sale of SOCAR’s bonds on the secondary market was launched on October 18. PSG-Kapital acts as a marketmaker of bonds (broker-dealer firm that assume the risk of holding a certain number of shares of a particular security to facilitate its trading). Purchase and sale of obligations may be implemented in ASAN Services ? 1 and ?2, as well as in investment companies that are BSE-members.

Operations on the secondary market will provide foreign individuals and legal entities with a right to buy bonds from their owners, as only Azerbaijani citizens and local companies had a right to obtain bonds on the primary market.  

Abdullayev further said that SOCAR plans to implement the second issuance of bonds in 2017, mentioning that the process will mainly depend on the demand in the market.  

The possibility of the next emission and high interest rate on SOCAR’s bonds had earlier raised concerns over the issue of outflow of foreign currency deposits from banks. The company, however, announced that it has no intention to create problems for the operation of banks, which set low-interest rates on deposits. Therefore, interest yield of new bonds is expected to be set at a level below five percent.

The issuance of bonds is considered to be a very important step for creating investment opportunities for the population, as well as giving an impetus to the development of the securities market in the country.

SOCAR also doesn’t exclude the possibility of issuing bonds in the country’s national currency – the manat in the future.