Retail Investors Drive Growth in Uzbekistan’s Debt Market Amid Stock Market Decline
In 2024, at the Republican Stock Exchange (RSE) in Tashkent, retail investors’ activity in the stock market decreased despite the trading volume nearly tripling. However, the debt market for retail investors experienced a sevenfold increase in the number of transactions, with its volume rising by more than 40%. The stock market’s development in 2025 is likely fueled by a further strengthening of debt instruments and potentially the launch of trading on international platforms like Bloomberg.
The total trading volume on the exchange in 2024 reached nearly 22 trillion soums, 7.5 times higher than the previous year. Most of these transactions occurred on the Nego Board platform, facilitating address transactions where buyers and sellers are acquainted.
Last year, the UCI stock exchange index fell by 6.8%. On the Main Board platform, primarily used by retail investors, trading volume in shares dropped from 362.9 bn soums to 131.6 bn soums, almost a threefold decrease. Meanwhile, the number of transactions increased by 8.4%, rising from 400,000 to 432,300. In contrast, the bond market on this platform showed growth, with trading volume increasing from 92.2 bn soums to 130.7 bn soums, representing a 41.7% increase. As a result, the trading volume of shares for retail investors is now nearly equal to that of the bond market. Over the year, the number of transactions involving debt instruments surged from 477 to 3,100, a nearly sevenfold increase. These indicators reflect an unusual shift toward the bond market in Uzbekistan.
Debt market
The microcredit organisation Biznes Finans Mikromoliya Tashkiloti is the primary driver of bond transactions. This organisation accounted for approximately 2,500 deals involving securities with a nominal value of 100,000 soums (about $7.70), thanks to the activation of the secondary market. Three bond issues from this company offer a yield of 27%, surpassing the deposit rates of many banks, which average 22.1% for individuals and 16.3% for legal entities as of November 2024.
Tolibzhon Mirzakulov, the head of Jett’s securities trading service, notes, «Previously, corporate bonds were primarily issued for legal entities and wealthy private investors, with a typical face value of no less than 1 mln soums. This automatically restricted access for retail investors, as such investments were unaffordable for many.»
However, issuing bonds with a smaller face value of just 100,000 soums has made the market more accessible to private investors. Mirzakulov anticipates that shortly, legal entities will begin using bonds more actively to raise capital and that investors will increasingly diversify their portfolios to include debt instruments.
This forecast appears realistic, especially considering Uzbekistan’s plans to allow the issuance of foreign currency bonds. A draft law on this matter has already been published for discussion, and citizens can submit their suggestions and comments on the document until January 28, 2025.
Sustainable finance
In 2024, bonds were issued targeting retail investors and large institutional players, with lower rates for the latter. One significant development was the issuance of the first green bonds in Uzbekistan. A mortgage refinancing company issued a tranche worth 50 bn soums and placed another 250 bn soums in uncoloured bonds. The yields on both instruments ranged from 18% to 19%.
Odil Musaev, the managing director of Alkes Research, highlighted the importance of this event, stating, «This will have a positive impact on the market and could serve as a stimulus for further development of the sustainable finance sector in the country. GSS+ (green, social, sustainable) bonds draw increased interest from international institutional investors.» He further noted that these securities comply with the international standards of the International Capital Market Association (ICMA) and have been verified by the Green Financial Center under the International Financial Center for Asia (IFCA).
Overall, transactions involving bonds from retail and institutional investors on the RFB Toshkent exchanges totalled 391.2 bn soums, four times higher than the previous year.
Share market
As of the beginning of 2025, 22 highly liquid shares are listed on the RFB. Only six experienced growth over the past year, while the others declined significantly, with some losing several times their value. Investor interest in these shares weakened in 2024, driven by negative expectations regarding earnings and dividends.
Tolibzhon Mirzakulov commented, «Unfortunately, we observed a decline in trading on the stock market in 2024. Several factors contributed to this downturn, but the primary reason is a loss of confidence among investors at all levels. Many large industrial companies with state participation, previously viewed as attractive assets, have shown a consistent decline in their stock prices. As a result, investors have shifted their focus to more secure options, such as bank deposits.»
For instance, shares of Uzmetkombinat, a leader in the country’s ferrous metallurgy industry, plummeted by 36.8%. In its report, Freedom Broker suggested that this scepticism stems from the company’s revenue decline, which began in 2023 due to an unfavourable pricing environment in the rolled metal market and increasing competition from foreign producers.
«Revenue dropped by 6.9% year-on-year in Q3 2024. Although the operating margin improved by 50 basis points to 9.98%, removing UzMK’s monopoly on scrap procurement adds uncertainty to its future performance,» analysts stated.
Additionally, the company announced that it would only pay dividends on preferred shares in 2024, leaving common shareholders without returns. This decision is linked to a large-scale investment project for a foundry-rolling complex requiring significant funds. At a recent meeting, Uzbek President Shavkat Mirziyoyev indicated that investment in the enterprise has halved and urged management to improve performance in the first quarter of 2025.
The construction sector also faced challenges, with shares of Kizilkumcement nearly halving in value due to the company’s poor financial results throughout the year. It has not paid dividends for several years.
Some securities declined without clear fundamental reasons. For example, shares of Hamkorbank fell by 27.2% over the year, despite a 14% year-on-year increase in net profit in Q3 2024 (the full-year report has not yet been published). Freedom Broker believes the stock could rise by 1.5 times to reach a target price of SUM 37.7.
However, there have been notable success stories in the banking sector. Shares of Ipak-Yuli surged by 384% in the first half of the year. Although they later corrected, the final yield for the year stood at 32%.
The Uzbek Republican Commodity and Raw Materials Exchange (URTSB), a well-regarded dividend aristocrat, recorded a modest increase of only 4.29%. This year, the state sold 4.44% of its shares in the company during the first secondary public offering (SPO) in Uzbekistan in five years, held in the first week of November. At that time, shares on the secondary market were priced higher than those sold by the state. Therefore, investors who purchased shares at the SPO saw their portfolios grow by 41.5% compared to the offering price by the end of December.
The shares of UzRTSB were sold under the «People’s IPO» program, which investors anticipate will continue into 2025, with a total of 12 issuers participating in the campaign.
Plans for 2025
Freedom Broker explains in its report that Almalyk MMC, Uzbektelecom and Uztemiryulcontainer securities are expected to be offered at the «People’s IPO» in 2025.
Giorgi Paresishvili shares such plans for 2025 for the stock market: «The first and most important direction is the integration of our market with international platforms. The Uzbek market was like a lost island in the ocean. It was because information about our securities was not available on international platforms. In 2024, we took the first step by providing market data through Bloomberg Terminal and Refinitiv. Now, we plan to go further: to enable direct trading via Bloomberg and other platforms. This means that traders from London, New York or Singapore can trade Uzbek securities directly from their terminals. This step requires serious work on technological solutions, but we expect to be able to make this a reality as early as 2025».
The second key area will be the development of the debt market. Paresishvili emphasises: «We will try to develop the bond market as much as possible. Especially the potential of foreign currency securities.»
The third direction aims to increase the number of transactions on the organised market. «Currently, a significant portion of transactions occurs in the unorganised market. Our goal is to demonstrate the advantages of exchange trading to issuers. These advantages include transparency, protection of shareholders’ rights, and attracting new investors. We are already seeing interest in these opportunities and will continue our efforts,» says the chairman of the board of the RFB Toshkent. He also emphasises that collaborating with global depositories will be crucial, as Uzbekistan seeks to allow international investors to store their securities as they are accustomed to.
