Since it was set up in 1994, not much has happened on the bourse. The total market capitalisation of the market stands at around $6bn or 11% of GDP, but the vast majority of listed companies are state-owned and they are only listed because they had to have shares as part of the reorganization of the economy following the collapse of the Soviet Union. It’s not like Uzbekistan is home to a lot of equity investors or investment banks.
However, in recent years that has started to change. There is trading on the exchange and a small group of around 7,000 retail investors that have started to play the market account for something around 40% of its daily turnover of about $2mn per month.
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The dividend yields in Uzbekistan for the stocks that pay dividends are a fairly generous 15-20% but are denominated in local currency, which reduces their appeal due to high inflation. The focus on dividend stocks also causes the stock’s price to rise as the date of record approaches when the dividend payments come due, and the price falls off again immediately afterwards before building up again slowly a few months later.
I have been involved in the AFC Uzbekistan Fund almost from the inception of the fund. It is one of my best-performing investments over this time period. Uzbekistan is re-asserting itself as the central hub of the old Silk Road.
Economic reforms continue to be pursued by the government and this will inevitably draw in more capital. The fact that the market is selling at a fraction of GDP and is illiquid makes it an excellent target for individual investors. This is the time to build a position.
At some point, the story will get out and larger funds and big money will begin to flow into the country and that is when early investors will get paid.