Baku Stock Exchange highlights challenges facing regional capital markets

Countries across the region face challenges in developing the foundations of their capital markets, Ruslan Khalilov, Chairman of the Board of the Baku Stock Exchange (BSE), said.

According to Report, Khalilov made the remarks at the Second Azerbaijan International Investment Forum (AIIF 2026) in Baku.

"If we look at the financial sectors of regional countries, including Azerbaijan, they are predominantly bank-driven. On the other hand, when we talk about savings and how people manage them, everything is linked to the state pension system. It is not a defined-contribution system but a defined-benefit system," he said.

Khalilov noted that both the supply and demand sides of the capital market therefore faced certain challenges.

"We face the task of developing the foundations of capital markets not only in Azerbaijan but across the region," he said.

According to Khalilov, Azerbaijan's market currently consists mainly of corporate bonds, Central Bank notes and repo transactions involving them, while the real sector accounts for only a small share of the bond market.

"Over the past two years, we have conducted two IPOs, which is a major achievement and an important milestone for the local equity and capital markets. But we should not stop there," he said.

Khalilov said new opportunities should be created for local companies to access capital markets. He identified three key areas for developing markets in frontier economies such as Azerbaijan: technology and infrastructure to ensure market access; transparency and credibility to attract more investors and build trust; and greater financial literacy and awareness in the domestic market.

He said the exchange was working in all three areas, while the next challenge was ensuring that these efforts translated into real capital-market growth and attracted more companies from the real sector.

"We are building infrastructure and connectivity both within the financial sector and across borders," Khalilov said, noting cooperation with regional markets including the Abu Dhabi Securities Exchange and Astana Stock Exchange.

He added that the BSE had already held several extensive discussions with the London Stock Exchange Group (LSEG) on technology transfer, exchange of expertise and integration of depositories.

Khalilov said regulatory and legislative harmonization was also important for enabling cross-listings and dual listings.

However, he stressed that cooperation should go beyond regulators and stock exchanges.

"These are only the visible tip of the iceberg. The less visible part is the cross-market partnership between different industries and investment sectors of the two countries," he said.

Khalilov noted that major local companies often approach investment banks in the United Kingdom for direct financing or eurobond underwriting, meaning the domestic capital market is bypassed and left with a secondary role.

He said efforts should focus particularly on transferring British investment banking expertise and stock exchange or multilateral trading facility technologies to Azerbaijan so that companies can raise financing through local capital markets and listings.

"I am confident that Azerbaijan has many flagship companies that are no less attractive to investors in the United Kingdom, Europe or North America than companies from other countries in the region," he said.

Khalilov added that this would require laying the necessary foundations, developing dialogue between sectors and raising awareness of investment products not only among retail investors but also among decision-makers at major companies, so they consider capital markets as an alternative to bank financing.