- Victor Albinovich, I suggest at the very beginning of the conversation to determine the basic concepts or, if you want, to hold a small economic educational program. What is the securities market, what are securities and how can they be of interest to the average Belarusian?
- The securities market is one of the types of financial markets in which securities are traded. There are transactions between entrepreneurs and investors regarding various types of securities, such as shares, bonds, bills, options and others.
Securities are a special type of documents that give you certain rights without imposing obligations. Securities from some point of view can be called alternative money, because they can be used to pay their own debts. The presence of your security indicates that you have any property, any value. You can sell a security at any time, and you can get income on it. You can earn on them in different ways, but we will talk about investments. This is one of the most popular ways in the world. It looks so. A person buys a certain amount of securities, thereby creating assets for himself. Over time, these assets he receives payments, interest and so on, and what earns. As a rule, investments are made for a long period of time. The profit on such investments can significantly exceed the interest on Bank deposits, so it is profitable and promising to do so. In this case, a participant in the securities market is called an investor, and the investor can be both a legal entity and an individual, an ordinary resident of our country.
- The securities market is developed in many countries, including our nearest neighbors. But, unfortunately, we are in its infancy. Have you tried to compare the situation in this sphere abroad and in Belarus?
- Of course, I tried, and made very interesting conclusions. Take, for example, the leader in terms of the securities market - the USA. If we take as a benchmark of GDP (gross domestic product), there is an annual issue of securities of all kinds reaches 40% of GDP. In Europe, the flagship issue of securities is Germany. There, this figure is up to 10%. In Poland, up to 5% of GDP. In Belarus, according to some sources, the annual issue of securities today is from 3.6% to 3.8% of GDP. We are quite comparable with our neighbors in terms of the volume of securities issued. However, there is a market, there are issuers, and the population, a private investor, practically does not participate in the activities of the market.
- How would you describe the current Belarusian stock market?
- First, we need to turn to the brief history of the still young securities market of Belarus. Government bonds were the first to appear on the market. These are the most protected securities, because all guarantees for them are taken by the state. Government securities will always be the most reliable in terms of security, but they give, in my opinion, a stable, but not very large income, up to about 5% per annum.
Then commercial banks began to enter the market with their securities. This is the second on the security of securities. Our banking sector is quite stable, we had practically no bankrupt and closing banks, as in Russia in the 90-ies. In addition, I would like to stress that our regulators - the national Bank, the Ministry of Finance - are closely monitoring the situation on the securities market. Just like that you will not enter the market with bonds or other securities. Clear legislation, high requirements for assets and reporting are only for the benefit of both the market and its participants.
Bank bonds offered by the main players: Belarusbank, Belagroprombank, Belinvestbank, Belgazprombank, Priorbank and others, are reliable and give up to 4% of annual yield. Bonds are issued both in Belarusian rubles and in foreign currency. But currency bonds in our case can be treated as savings bonds.
The history of the issue of corporate bonds in the modern Belarusian history began in 1997, when the corporate bond loan was issued by JV "Belparket", in 2002 corporate bonds were issued by PS CJSC "Trust Promstroy", then there was a lull. In 2015, Belarusian enterprises of different ownership forms and spheres of activity again drew attention to the securities market. In the current year, the number of open bond issues that can be bought through banks increased - about 10 companies issued their bonds. They are in the ruble equivalent, and in dollars and euros.
- What do you think are the positive trends in the development of the corporate bond market in our country?
- I think that currently in Belarus for several key reasons there are more favorable conditions than ever for the accelerated development of the corporate bond market. First, the financial performance of enterprises in various sectors of the economy has significantly improved, and this directly affects the rise in demand for investment from external sources. Secondly, the stabilization of the exchange rate in the country contributes to long-term borrowing. Third, the population has a significant investment potential, having large savings in cash dollars or deposits in banks, that is, the population has the opportunity without much risk to invest part of their funds in other, more profitable types of financial instruments.
- What does the development of the corporate bond market give to the country's economy as a whole?
- I will try to answer as detailed as possible using basic economic concepts. The market of corporate bonds, competing in the long term with loans, gradually reduces the cost of borrowing, thereby contributing to a more rapid development of the real sector of the economy.
In General, if there is a developed market for corporate bonds, the interests of all market participants - the Issuer (the company that issued the bonds), the investor (legal or natural person) and the state are respected.
The interests of the Issuer of corporate bonds are that it seeks to obtain a loan at the lowest possible interest rate for the long term. The investor is interested in investing at the highest possible interest rate with minimal risk. For him, attractive bonds with the right of early repayment, quality assurance and liquid secondary market. The interests of the state in the corporate bond market are, on the one hand, to maximize tax revenues in the process of issuance, circulation and repayment of corporate bonds, and on the other - to ensure the possibility of a normal investment process in the real sector of the economy.
And most importantly - the market of corporate bonds forms a certain model of financial behavior of the company. Having a real opportunity to earn on the stock market, its average member feels like an owner, if you want, a participant in the economic process in the country. After all, he has a value on his hands-a bond, which, unlike a stash "in a stocking", brings a stable income. And maybe in the near future hundreds of Belarusian men and women will start their day by studying stock market reports, as millions of Americans, Germans and Chinese have been doing for decades.
The average yield of various securities for 70 years of observations in the us markets has the following values: ordinary shares-12.3%; long-term bonds of corporations-5, 9%; short - term bonds of corporations - 5.4%; short - term government bonds-3.7%; inflation-3.2%. (Source: Abramov, A. E. investment funds: Profitability and risks, portfolio management strategies, objects of investment in Russia) Moscow, 2005)
- So we came to the main point-what are corporate bonds and why are they interesting to Belarusians, except for moral satisfaction from the possession of some value?
- The bond today is, in fact, a debt paper. If you look from the side of the enterprise, it looks like this: you take a loan, pay interest and, as a rule, have the right to buy back your debt every year. On the part of the buyer of bonds is also quite simple. Companies issue these bonds for up to ten years, so the buyer can buy them, receive profit within the specified time, and then sell them. Or, in some cases, when it is stated in the contract, the buyer can contact the Issuer of the bonds and return them earlier under certain conditions.
- What private companies and why are corporate bonds issued?
- Recently, the issue of bonds carried out a well-known company "Evrotorg" (network of shops "Evroopt"), "Factory Romaks" (network of shops "Island of purity"), "Prostormarket" (a chain of stores ProStore), a medical centre "Lode" and others.
Corporate borrowers usually offer high yield to bondholders-6.5% per annum and 8.5% per annum. For reference: the maximum rates on Bank foreign currency deposits are in the region of 2-3%. Therefore, it is not surprising that investors are quickly buying up corporate bond issues.
The main objective of corporate bond issuance is to reduce the credit load of enterprises in the real sector of the economy. Today you can go to the Bank and get a loan at 9-10%, and you can issue bonds and attract investment at 6-7% per annum. If this is a decent amount, the difference in the credit load will be quite significant. Suppose that the company has enough assets that cover these bonds with interest and interest payments. In this case, please issue the necessary bonds and raise the necessary funds.
As a result, the Issuer has the opportunity to offer a bond rate that will be attractive to both parties: both for the investor, as it will be higher than the rates on Bank deposits, and for itself, as it will be lower than the rate on Bank credit
- Sounds great. But as they say, free cheese is only in a mousetrap. What about the pitfalls? Do not threaten our fellow citizens shocks like the notorious MMM?
- I'm sure not. The state takes control of the securities market in Belarus very seriously. An effective stock market infrastructure has been created, including the Belarusian currency and stock exchange, a two-tier Depository system consisting of the Republican Central securities Depository, the national Bank Depository and 53 second-tier depositories, professional participants of the securities market, and government bodies. This infrastructure is able to ensure the flow of financial resources to the real sector enterprises at relatively low transaction costs and risks for investors and issuers of corporate bonds.
But there is one aspect of the activities of private investors in the securities market, which I would like to highlight. This is a question of financial literacy of the investor, the question of his awareness of market participants.
As many experts note, the yield that the Issuer promises is not the only parameter that individuals should pay attention to when investing in bonds. To assess the opportunities and risks associated with investing in bonds, it is necessary to be able to read financial documents and analyze the data. So far, given the relatively low financial literacy of the population, competently analyze the information provided in the prospectus of the bond issue, not everyone can.
- What do you recommend? How to act to natural persons-investors to avoid certain risks when working with corporate bonds of Belarusian enterprises?
- Investors should get the full picture about the benefits and risks of purchasing the bonds: information on the situation of the borrower in the market, the revenue structure, the profitability of the different lines of business. It is impossible to stop on standard publications of profit and loss statements. It is very important to pay attention to the reliability of the Issuer, the duration of its work in the market.
It should be remembered that in the Belarusian market today there are both secured, that is, issued after the Deposit of a certain pledge, and unsecured, that is, guaranteed only by the assets of the enterprise, bonds. In the latter case, the solvency of the Issuer, the stability of its business is especially important for investors who have invested in bonds money, could return them. After all, bonds can be issued by a young company that only enters the market and does not have serious assets. Moreover, its activities, including the issuance of corporate bonds, do not contradict the law. In this case, the risks when choosing the object of investment still lie not only on the state, but also on the investor.
In my opinion, you should trust adult companies that have been operating in the market for at least ten years. If companies have passed the crisis of 2008, the currency crisis of 2011 and the crisis of 2014 and develop further, they can be trusted.
I am sure that the corporate bond market in Belarus has a great future. Corporate bonds can be an interesting tool for placing free funds. However, to use this tool, to understand all kinds of risks, people must have a certain level of financial literacy.
Alexander KORABLIKOV,