| Trading with Foreign Stocks in Georgia |
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06/09/2010 12:13 (523 Day 03:31 minutes ago) | |||||
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The FINANCIAL -- Out of eight Georgian brokerage companies listed on the Georgian Stock Exchange only four trade with foreign stocks including BG Capital, TBC Broker, Qartu Broker and TbilinterCapital Ltd.
“Foreign stocks are not popular compared to Georgian ones. I would say somewhere between 20-30% invest in foreign stock. Mainly people with a good financial background make such investments. They do a preliminary analysis of the target company, have a defined risk appetite and basically know what they want,” declared Tariel Chichua, CEO of TBC Broker.
“Georgian investors and clients are trading with foreign stocks in general. However the most traded are Bank of Georgia stocks, listed in the London Stock Exchange.
The majority of BG Capital clients are investing in Bank of Georgia shares, which is the only Georgian company listed on the London Stock Exchange. On the GSE Liberty Bank, Teliani Valley, Caucasus Energy and Infrastructure are more or less actively traded. The foreign stocks which are most traded by Georgian HNW individuals are well known large Mcap companies like Citi Bank, JP Morgan, Apple, Microsoft , and BP shares,” said Giorgi Shengelia, BG Capital.
The prices of the most popular stocks as of 2 September are as follows: Walt Disney are 33.98 USD (DIS US), Apple - 252.17 USD (AAPL US), JP Morgan - 38.2 USD (JPM US), and Citi Group - 3.93 USD (C US).
The majority of investments by individuals are from 1,000 USD and up. Shengelia says that due to commission there is no use in buying foreign stocks if you are purchasing them in small quantities (less than 5,000 USD).
“Investments vary from 1,000 USD to 30-50,000 USD. Advanced investors prefer to break up their portfolio among several investments, although most stick with 1 or 2 stocks at a time,” declared Chichua, TBC Broker.
Foreign stocks can be purchased quite easily at BG Capital and TBC Broker. For those who would like to purchase foreign stocks, an account should be opened at BG Capital, after which specific stocks are purchased.
“Today, trading foreign stock is very easy, even in Georgia. You just visit us, fill out an account opening form, sign a contract, deposit money to your account and you’re ready to trade on the world’s biggest stock exchanges. This takes somewhere between 15-30 minutes of your time,” said Chichua.
“People that invest without particular knowledge or strategy are just gambling,” said Chichua.
“You might as well go to a casino. Our advice would be for you to have a consultation with professionals. Visit us, we will help you define your investment strategy, tell you about different products (there’s much more to investments than stocks), and provide general advice. Even though the internet is a great place, we have access to much more information that might be helpful to you,” added Chichua.
Shengelia, BG Capital, says that the main reason for purchasing foreign stocks is high liquidity and it is traded more actively. Regarding Georgian stock prices, the market is underdeveloped and there is a lack of liquidity.
“Most investors invest for growth. Speculation is something that we do not see that often,” declared Chichua.
“From what we can see, interests vary. Many invest in Russia, but we also have clients that prefer American companies (Disney is a good example). There are no particular stocks that appeal to local investors,” declared Chichua.
As Chichua says, perspectives are immense in foreign stocks. “The year 2009 is a great example of exceptional capital markets performance (100-130% growth around the world). That’s right, you will get the same return in 10 years with a bank deposit (assuming the rate is 10% annual in USD, simple compounding).
Of course, such performance is an exception, but there are many very interesting possibilities out there. Unfortunately, the Georgian stock market is so undeveloped that I cannot even compare it to a foreign one.
Bank of Georgia and Liberty Bank are 95% of what is traded today on our exchange. And the market is quite illiquid. Individuals and corporations that seek a true investment experience should divert their gaze towards international markets,” added Chichua.
Despite vast opportunities in foreign markets, Georgian investors still prefer investing in stocks locally. As brokers declare there is a boom on Bank of Georgia and Liberty Bank stocks.
Interest towards Georgian securities is higher as there is local awareness and it is much easier to get to know financial performance and the company’s condition, consequently the individual has trust in and knows the company better, and therefore invests in it. As for foreign stocks, from here the analyses of a company might be difficult sometimes,” declared Shengelia.
“In foreign markets the client needs more knowledge of companies and the environment. Despite the fact that the foreign market is more liquid Georgians pay more attention to the local market for several reasons, trade, and especially stocks are cheaper in Georgia than in the international market,” said Iury Metonidze, Broker at TbilinterCapital Ltd.
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