Investing In Emerging Belt & Road Initiative Stock Markets: The Caucasus

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Building An Investment Portfolio In Armenia, Azerbaijan & Georgia

Op/Ed by Chris Devonshire-Ellis

With China’s Belt & Road Initiative gaining much attention due to the vast financial spend across regions, it makes sense to start to examine how that expenditure will impact on listed companies, some of them direct participants, on stock exchanges throughout the Belt & Road Initiative.

Projections of how much China has actually invested differ. Morgan Stanley have estimated that the total spend by 2027 will reach US$1.2 trillion, while Moodys Analytics put the total spend at US$614 billion at the end of 2018. To put this into context, the United States has stated it will spend US$2 trillion on supporting the American economy due to Covid-19.

Whatever the figures, the results should be the same: Infrastructure investment into BRI countries could be reasonably expected to show up later as improvements in the performances of certain local businesses in industries impacted by such projects. Obvious candidates as improved infrastructure enhances trade are banks, rail, road, air and port operators, certain retail outlets and logistics companies, and especially those which have some element of Government ownership.

In this series of articles, we will examine the various regional exchanges, identify some of the key players and look at the possibility for foreign investors to get involved.

In terms of regulatory and professional oversight, the Caucasus has some way to go, although Armenia is probably more aware of the need for regulatory oversight and adherence to global standards than its neighbors. That said, all have partnered with one of another of the regulatory bodies, including the Federation of Euro-Asian Stock Exchanges which promotes the the cooperation, development, support and promotion of capital markets in the Eurasian region, and is based in Yerevan, Armenia, or the World Federation of Exchanges, representing over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups.

We can examine the three Caucasian countries below. Russia, which includes the Northern Caucasus, is featured in a separate article. Our previous article concerning stocks in Central Asia can be viewed here

Armenia occupies a curious position along the Belt & Road Initiative, as it is currently bypassed on the major rail lines due to territorial and political disputes in has to the north with Azerbaijan and to the south with Turkey. These have left it somewhat regionally isolated. Nevertheless, with an influential, wealthy and Western educated diaspora, the country is at the forefront of new technologies. These together with a more liberal investment regime are attracting attention, and especially in I.T. related spheres.

Azerbaijan is a fast developing country, growing wealthy on Caspian oil and gas reserves and as a transit point between Asia, Russia and Europe. There have been recent accusations of financial impropriety and lack of transparency involving international finance.

Georgia serves as a transit between the Caspian and Black Seas and as a main transit conduit for Armenia. Political tensions with Russia, with whom it shares a border and significant bilateral trade, can prove occasionally disruptive.

The general feeling in the Caucasus region is, that if you are going to go to the trouble of getting corporate governance to the level where you can issue stocks or bonds, you might as well go to Vienna, Frankfurt or London, which have more liquidity. Usually local listing is done to curry favour with the government, and more recently to soak up pension fund cash in Georgia and Armenia, a certain amount of which has to be reinvested in local currency instruments.

Foreign participants should be aware that the key to investing isn’t to look at pre-existing fundamentals and performance, the key to investing is working out as best you can what is likely to happen in the future. Examining shareholder meeting discussions and looking at obvious market progression, both domestic and regional and the probability of this happening, is a research issue. Which is why Silk Road Briefing is a useful tool. A subscription can be obtained here.

For obvious reasons we recommend caution when investing in stocks and shares in these emerging markets. We make no recommendations, risks are those of the reader alone.

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About Us

Silk Road Briefing is written by Dezan Shira & Associates. The firm provides strategic analysis, legal, tax and operational advisory services across Eurasia and has done since 1992. We maintain 28 offices throughout the region and assist foreign governments and MNC’s develop regional strategies in addition to foreign investment advice for investors throughout Asia. Please contact us at or visit us at