HERE AND BEYOND
Armenian Investors Make Their Way to International Capital Markets
Media Room
ARKA News Agency, Exclusive interview with the Head of Ameriabank’s Brokerage Unit, Edgar Petrosyan

ARKA – How do you assess securities market in Armenia and its attractiveness for market players?

Mr. Petrosyan – Main activity on the Armenian securities market is generally related to debt instruments such as public and corporate bonds. Investors prefer to place money in debt instruments given their higher liquidity, which makes it easier to carry out any transaction and form a flexible strategy. In this context stock market is less attractive for investors mainly due to issuers low level of attractiveness, as well as the organization of trading process. Generally, investors are interested in placing money in liquid assets facilitating the process of flexible strategy design and management. NASDAQ OMX Armenia regularly takes steps to raise the number of stock exchange players to the extent possible which can trigger market shake-up. For instance, situation is exactly the opposite on international markets where the stock market is more active. It is not that investors cannot analyze the Armenian market due to lack of necessary information, but it’s about liquidity. In the meantime, when it comes to Armenian and western securities markets preference is given to foreign markets since our market is by far behind the foreign ones in terms of its low development level, moreover, potential investors see higher financial risks resulting from low liquidity.

Day-trading is a new trend emerging in Armenia. Day-traders operate solely on foreign markets and during one trading session day-trader can make up to 1,000 transactions amounting to dozens of thousands each, while application of state-of-the-art technologies, trading algorithms and various types of orders can multiply this figure by several times. Total number of such transactions per year equals approximately 25,000 with overall volume over $100-130 mn.
It is not surprising that day-traders give preference to foreign markets, since these transactions are only possible in a climate of well-developed markets.


ARKA – Which securities market instruments are most demanded in Armenia?

Mr. Petrosyan – Traditionally, the greatest demand is for shares of foreign issuers, mainly from US and Europe. But it should be mentioned that over the last 1-1.5 years investors and traders also tend to trade derivatives (futures, options) on foreign commodity exchanges. Based on their business requirements the majority of clients hedge their positions on commodity exchange thus managing the risks and protecting themselves from uncontrolled price swings. When it comes to day-trading short-term traders prefer index futures as highly marketable instruments. Ameriabank provides its clients with access to the world’s largest stock exchanges where various objectives can be achieved through a wide range of financial instruments.

ARKA – It is common knowledge that capital market comes with high risks. How do you assess them? What rules do you go by when managing risks on capital market?

Mr. Petrosyan – It’s no secret that just like any other business activity stock market trading entails certain risks, exposure to which is to be defined by each investor or trader separately. As a rule, investment strategy should initially calculate all present risks to be handled during the whole process. Depending on the adopted strategy the investor should initially determine his own risk appetite. Conscious approach and risk management skills are of great importance here. Sure enough there is no standard formula for risk calculation as each investor has his own method of doing it. The profitability of this sphere is undoubtedly high, but so are the risks. All the while there are up-to-date technical solutions starting from electronic trading platforms up to various financial instruments assisting in mitigation and control of financial risks. Wide choice of financial instruments enables to respond to developing situation on the market in a timely and flexible manner and change one’s strategies where necessary. It’s no secret that successful traders ensure over 100% return and there is more to come. There are traders with return level exceeding 700-800%. Sounds quite exciting given that to a greater extent results depend on the trader himself. Today each of us has a chance to realize his or her potential in this industry.

ARKA – What platforms does Ameriabank use for trading account management?

Mr. Petrosyan – Ameriabank has a multifunctional trading platform with wide options for various analysis and placing of diverse order types. In other words there is no need to continually track one’s positions and changes on the market. You only need to define your strategy by means of inputting core data into a special program with no further need for constant monitoring of market situation. Besides, our geographical market coverage already allows using a wide range of instruments open to Ameriabank’s clients.

ARKA – The list of organizations providing investment services in Armenia comprises 8 investment companies and 2 banks, including Ameriabank. How do you assess the competitive environment of investment service market players?

Mr. Petrosyan – Most banks and investment companies are mainly concentrated on the local market and their core service list includes local securities market trading and transactions with debt instruments which are relatively liquid and allow implementing a pre-determined strategy. Sure enough all market players are fully aware of the fact that investment service niche is to a greater extent free and its market is underserved in Armenia. What makes Ameriabank different in this context is that it offers to its clients up-to-date and convenient service not only on local but also on foreign markets such as Northern America, Europe, Russia, Asia. Ameriabank also offers a wide range of trading instruments quoted on the world’s financial exchanges. Investment service niche is still free and traders as well as investors demand better and more flexible service, knowing that competition in this industry is really high.

ARKA – How would you describe the current market demand for investment?

Mr. Petrosyan – Investors, as well as ordinary people with idle funds are in a continuous search for more attractive investment instruments. The objective here is not only to increase return on assets but also to diversify their investments. However, demand in Armenia is not very high since historically vast majority of Armenian population has preferred to invest their funds in traditional instruments, such as bank deposits, paper gold, and real estate. Information is of great importance here since many people are not even aware of such investment opportunities as e.g. investment in equities of foreign companies or gold trading on international markets. It takes time to realize it. Along with investment service development in Armenia a growing number of people get interested in them and start to realize the necessity of using different financial instruments for a variety of purposes. Moreover, given the current decline in USD deposit rates a great number of investors seek new directions for investment resulting in new opportunities for and keen interest in this market entry.

ARKA – How do you assess market upside potential at this stage?

Mr. Petrosyan – According to my estimate, it is quite high given the fact that the market potential is not fully realized and there are lots of potential investors still using services of foreign brokers. Positive dynamics should be noted here since our terms and services are just as good as and in some cases even better than those provided by foreign brokers, but at the same time we represent a local company which is more apprehensible for local market. We should raise general awareness so that population starts to use investment services more actively. Market development is going up, even if at slow pace. Gradually investors start to seek ways to make their investments more effective, and this can be a good base both for investors and that group of population who prefer advanced technology solutions.

ARKA –Ameriabank provides brokerage services for Eurobonds trading. Can you please describe the current market demand for Eurobonds and the bank’s volume of Eurobond-related transactions?

Mr. Petrosyan – Ameriabank was the first bank in Armenia to provide its clients with Eurobond-related services. These bonds aroused the interest of both local and foreign investors, resulting in rapid growth of price (profitability dropped from 6.25% to 4.85%, while the price shot up and remained high). Latest escalations in Nagorno Karabakh Republic and general political situation in Ukraine have definitely had a negative impact on Eurobond market of the whole region. However it should be noted that during this tense period domestic demand for Armenian Eurobonds not only remained the same, but even experienced certain growth. For example, as opposed to the second quarter the share of Eurobonds in Ameriabank’s investment portfolio increased by 25% reaching $19 mn against $15.5 mn. Currently positive dynamics on this market have recovered and this inspires investors’ confidence.

ARKA – Can you name securities trading platforms currently used in Armenia? Ameriabank, in particular, uses Ameria Global Trading platform and has recently announced about implementation of yet another trading platform – MetaTrader4. What unique features does it have and what is the purpose of its implementation?

Mr. Petrosyan – In 2010 Ameriabank presented to its clients multifunctional Ameria Global Trading platform which ensured their direct access to stock exchanges in 23 countries. This platform affords a chance to work directly on stock markets but is not open to general public due to high entry requirements. In other words, financial limits for entry are very high and block access for small investors. In 2014 Ameriabank launched Metatrader world-known trading platform. This platform gives wide opportunities for brokerage and trading on Forex and CFD markets, including full package of market orders, sales strategy testing and trade automating via MT4 mobile app by means of MQL4-based robots anywhere worldwide. All these make brokerage operations accessible for wider population. Thus Metatrader4 allows operating fractional lots by means of CFD instruments (Contract For Difference), which in its turn enables to get to know this business with minimal costs. By way of comparison I can note that minimum deposit for AGT platform amounts to $5,000, while no minimum deposit is requested by Metatrader4 platform. This way anyone can try his hand at market trading with a minimum sum of e.g. $50, etc. For example, one can buy 0.1 CFD of any security on stock exchange. CFD instruments are yet available for trading on foreign markets only – mainly for most liquid goods. These two trading platforms were initially designed for different categories of traders and investors.

ARKA – How do you assess foreign investors’ interest in the Armenian securities market? Are they ready to invest their money in Armenia?

Mr. Petrosyan – Of course, Eurobond issuance has had a positive impact on the market, however it is not enough to get foreign companies’ interested in making investments on Armenian capital market. Several years ago there were foreign companies which had invested in public bonds with high yield. However, rates decreased and the interest of foreign investors somehow died away. Nevertheless, today we can be proud of the first successful placement of Eurobonds which are actively circulated on secondary market and hold their position. 

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Updated 27.10.2014, 17:49
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