OREANDA-NEWS. January 20, 2009. Stock market is one of the most objective reflections of the trends that can be observed in the industrial economy. The key indicators of the national stock market for the past year demonstrate positive shifts in the strengthening of financial stability of the enterprises of the country, improvement of the level of their capitalization, reported the Official website www.investuzbekistan.uz.

Last year the Government implemented a series of measures to motivate corporations to raise their capitals. These measures have already produced some visible results. Thus, in order to raise the capital bases of the shareholding companies last year the President of the Republic of Uzbekistan passed a Decree (18 November 2008, No. 4053) "On measures to further raise the financial stability of the enterprises of the real sector of economy", according to which the minimum capital requirement for the corporations was raised to the equivalent of USD 400,000 in national currency, according to the exchange rate quoted by the Central Bank of the Republic of Uzbekistan.

Also, in July last year, a new Law "On the securities market" was passed marking a new stage in the development of this market. The need for this law was pointed out, and an instruction to prepare it was stated in the Presidential Resolution of 27 September 2006 No. PR – 475 "On measures to develop the securities market."

Deputy Director-General of the Centre for Coordination and Control over the Functioning of the Securities Market under the State Property Committee of the Republic of Uzbekistan Askar Obidov said the Law of the Republic of Uzbekistan "On securities market" not only unified the norms of the previous laws, its content was enriched by a number of principally new norms that meet the requirements of the modern market, and match the best international standards.

At the same time, all the measures taken to develop the national stock market last year have produced some positive results.

In 2008, it was not only the institutions of the financial sector, particularly commercial banks that raised their capitals, but also the enterprises of a number of other sectors of the economy. For instance notable increases in capital were observed for the companies, such as UzTransGaz (up more than 3.6 times), General Motors Uzbekistan (up more than 28 times), and the enterprises of the cotton processing industry, and some of the cement producing companies.

Thus, in the beginning of 2008 the paid-in capitals of all corporations in Uzbekistan made up 3.3 trillion soums. By the end of the year, this indicator reached the level of 4.5 trillion soums. The growth made up almost 1.3 trillion soums, which is a record-breaking indicator for this market.

At the same time, the growth of capitalization of shareholding companies of Uzbekistan is one of the most important factors of their development, as the increase of the company's capital through additional stock floats assists the growth of its financial stability, and provides the market new financial instruments, increasing the volume of IPO and secondary trades through them.

Thus, the total turnover of the market grew by more than 300 billion soums (up 1.7 times) compared to 2007. The share of the IPO trades in the total exchange turnover made up 68.5%. On the trade platforms of the unorganized IPO market the volume of stock sales more than doubled compared to 2007 results, which again illustrates the activeness of corporations in building-up their capital bases.

Compared to the results of the year 2007, the total turnover of the secondary stock market of Uzbekistan grew by 65.5% or 88.1 billion soums.

The growth of the level of companies' capital will also assist competition, and as a result only the largest and financially-stable companies will remain in the market, which in the end will leave the most attractive objects for investment.

The growing activeness of the companies in the operations on the securities market is also illustrated by the fact that last year the number of companies that passed the listing procedures at the stock exchange more than doubled.

The growth of capitalization of corporations served as a stimulus for the decision to raise the minimum capital requirement for the professional participants of the stock market, and thereby increase the level of their reliability, as well as reduce the risks associated with stock market operations.

For this specific purpose, on 29 December 2008 the Cabinet of Ministers of the Republic of Uzbekistan passed a Resolution "On measures to implement the Law of the Republic of Uzbekistan "On securities market."

According to this Resolution, starting from 1 January 2009 the minimum capital requirement set for professional participants of the securities market was doubled. Thus for the investment consultants a requirement of the equivalent of 10,000 euros was set; for the investment intermediaries – 50,000 euros; and for depositaries – 100,000 euros.

At the same time, to date 13 licenses have been issued and 26 licenses were revoked for the professional activity in the securities market. As of 31 December 2008 the number of valid licenses of professional participants of the securities market made up 221.

Summing up the results of the stock market development for 2008, and looking at the prospects of its development in 2009, the following conclusion can be made.

An insignificant reduction in the number of corporations is expected in the short future, resulting from insufficiency of companies' capital for the new minimum requirement, possibly with their reorganization into other organizational-legal forms. However, this factor will also have a positive effect of leaving only the largest and financially strongest companies in the market that will be most attractive as the objects of investment.

Thanks to additional stock floats by corporations, the volume of IPO trades is likely to increasing notably, later contributing to the growth of secondary market sales.

The following changes are likely to occur in the order of professional activity in the securities market. The institutes of infrastructure of the stock market are to grow in size as a result of the abolition of restrictions on the combination of different forms of professional activity in the securities market as envisaged by the Law "On securities market". Also, the financial stability of the professional participants of the securities market is likely to strengthen thanks to the increase of the minimum requirement set for their own funds.