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The original was posted on /r/armenia by /u/Botan_TM on 2023-11-05 21:00:39.
Hello, I’m a small individual investor from Poland and some ago Polish Warsaw Stock Exchange which I have in my portfolio, purchased majority share in Armenian Securities Exchange (AMX). I follow company investor relations and so I listened to a very interesting podcast about strategy and future of AMX. I thought you may find it interesting too so I have translated it, sorry for quality. I hope some noteworthy companies IPO or Armenians bonds mentioned in interview become accessible for me in future, especially I’m interested in Caucasus and Central Asia.
GPWtalk odc. 31 - Nowa strategia Armenia Securities Exchange (ep. 31 A new strategy of Armenia Securities Exchange) on YouTube and Spotify (only in Polish)
[NVK] My name is Nina Vincenz-Krajewska and I am a spokeswoman for the Warsaw Stock Exchange. I warmly welcome you to the next episode of the GPWTalk podcast series. Today my and your guest is Grzegorz Kucharski, a member of the Board of Directors of the Armenian Securities Exchange. Good morning.
[GK] Good morning, Nina.
[NVK] Last year, the WSE signed an agreement to acquire a little over 65% stake in the Armenian Securities Exchange from the Central Bank of Armenia. Please tell us what motivated this decision?
[GK] This decision is part of such a strategy of the Warsaw Stock Exchange, which has already been taking place for several, if not say a dozen years. The Warsaw Stock Exchange has always sought to acquire other exchanges. A dozen years ago, we were tempted to take over the stock exchange, or exchanges in the Balkans.
Unfortunately, there we lost battle with the Vienna Stock Exchange, Austro-Hungarian sentiments prevailed. And here an opportunity arose that, in a less formal way, we learned that there was an Armenian exchange that was planned to be sold by the Central Bank of Armenia, which was a 100% owner. We became interested in this topic. Negotiations took more than three years.
They were not easy. It is known that Armenia is a country of Armenians. Armenians are traders, so it was not easy to negotiate good terms. However these terms of the contract came out very well, because we managed to buy a very good product in the form of an very high-tech exchange, relatively cheaply, because the transaction cost was, depending on how we count it in dollars at that time, let’s say between 10 - 12 million PLN.
Our chairman Marek Dietl likes to throw in such an anecdote that we bought very modern stock in for a cost of medium-sized house in Żoliborz [northern districts of the city of Warsaw. It is located directly to the north of the City Centre].
[NVK] That’s right, comparable, especially in current times.
[GK] Yes, yes, so this is definitely a good purchase. We certainly won’t lose out on it. On the other hand, it needs to be said perhaps more broadly that here it’s not an matter of a financial investment first and foremost. The Warsaw Stock Exchange has very strong ambitions to be a leader in the region, but also outside our region. And the Armenian exchange will serve us as such, let’s say, a beachhead for the Caucasus, this Lesser Caucasus, because if we were able to carry out all the very ambitious plans, and if we succeed in achieving them, then we will have a clear example of the fact that thanks to Warsaw Stock Exchange it is possible to build a very serious and significant capital market in the country.
And at this point all the neighboring countries, like Georgia, Tashkent, Uzbekistan and so on… I know that they sound a little exotic. That’s true, because that is already a bit exotic. On the other hand, you have to remember that these are countries that have very large financial reserves. And these financial reserves are not utilized. This is that potential.
[NVK] So you could say that we are starting such an expansion from the Armenian stock market, which may also expand to other markets.
[GK] That’s right, that’s the plan, to exactly to put the Armenian exchange on our resume, because when you talk to other exchanges, even small ones, they appreciate our potential and size. On the other hand, one of the questions is always about what experience do you have on this field.
Well, and we don’t have such experience in overall, because besides as if not, the success of the Aquis exchange, was a typical financial investment. We didn’t bring any know-how there, we didn’t bring anything, it was just a financial investment. As you know, it sold very nicely. The profit was substantial. Whereas here the situation is completely different, because here it’s not even about these dividend payments and so on, it’s about this very point int he CV, to build a capital market there [in Armenia].
[NVK] Exactly with this capital market. I think few people realize what the potential of the Armenian capital market is in general.
[GK] Yes and here it is, the potential is huge. The country in truth is numerically small, about 3 million inhabitants of which one almost half of 2 million live in the capital. There is, of course, you have to remember here, that there are also huge diasporas, that is twice as many Armenians live abroad in diasporas in the United States, in Europe, like the Netherlands, Belgium, or even in Jerusalem, that is in Israel. And these are very strong, very rich diasporas, which are very strongly connected to their roots. They support Armenia, they support financially, they support economically, and so on. These are very strong ties. On the other hand, Armenia itself has a huge potential, because imagine that there is about $8-9 billion of clients deposits in banks.
[NVK] Well a substantial amount.
[GK] Yes, yes, taking into account 3 million inhabitants, so those are enormous money. And here let’s imagine a minimum scenario without some huge financial calculations. Let’s take from this $8 billion, 10% to be invested in the capital market.
[NVK] This is a good cash injection.
[GK] It goes without saying that this is really already a big, cool volume. And that’s the potential. Access to technology is also a potential.
[NVK] Well, that’s right. At what technological level is AMX?
[GK] Very high. Surprisingly high. Before I took current position and before I became interested in, I mean before I took the position of a board member at the Armenia Stock Exchange, I was running a integrative project here at the Warsaw exchange. Then I sort of necessity learned a lot more about the country and all the circumstances in it, economical, political, historical, than I known before, well, because this knowledge is not that common. Well, and when it comes down to it, Armenia is called the Silicon Valley of the Caucasus. Yes, and that’s why I even discussed about where does it come from? Well, it comes from the fact that they have very high, high level of education of technical schools, polytechnic ones and so on. They have a lot of IT specialist who work both in homeland and abroad, so technology is present everywhere, and this would surprise you here, because I have already kind of lived there for a while and also got to know various products. Well, I would say that we could take some ideas from there.
[NVK] So it’s not a one-way flow of know-how, but a two-way one?
[GK] Yes, yes. Our know-how will not be technology, because technologically, of course, we have some solutions that they don’t have, in terms of the fact that they don’t even have where to implement it, and that’s the flow from our side. On the other hand, we will definitely use the technological resources of Armenia and AMX, because they really have a very nice IT team in AMX. So maybe I’ll digress now, even recently the perturbations, to put it mildly, the tragedy that’s happening there now in Nagorno-Karabakh and the escape, well, because it’s a escape, of more than 100,000 Armenians living there, caused our AMX ranks to be filled by a group of very energetic IT developers who will also provide services to the Warsaw Stock Exchange.
[NVK] Interesting thread. I guess this is fairly fresh information?
[GK] Very fresh, it’s such one could name a hot news. However, it is as much as possible, given the conditions in Poland in Warsaw, where we know that there is a permanent shortage of IT specialists, some kind of solution for our group, where we run many projects, most of which are more or less related to IT, and it seems the supply of professionals from our sister exchange fits in here.
[NVK] I think it’s a win-win.
[GK] Exactly, exactly.
[NVK] Well, that’s right, you mentioned that you sit on the board of AMX, but so more specifically you are responsible for developing the implementation of the strategy. Also, of course, coordinating this cooperation between the two exchanges. Please tell me, what are the biggest challenges associated with this function at the moment? Because there is probably no shortage of them.
[GK] No, no, exactly. There is absolutely no shortage of them. There, practically, whatever topic does start there is a challenge. And here you have to keep in mind one fundamental thing, that Armenia is, first of all, from a higher risk region, such a normal calculated risk as if by any bank, any investment company, and this is the first downside.
The second downside is that Armenia is not in the European Union. As you know, EU legislation is very res…
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