American Journal of Business Management, Economics and Banking ISSN (E): 2832-8078 Volume 32, | January - 2025 P a g e | 130 www.americanjournal.org PARTICIPATION OF INSTITUTIONAL INVESTORS IN THE CAPITAL MARKET: IN THE CASE OF UZBEKISTAN Omonov Sardor Ulmasovich PhD, Tashkent State University of Economics, Uzbekistan Email: sardoromonov7777@gmail.com A B S T R A C T K E Y W O R D S This article focuses on the current situation, participants and problematic aspects of the national capital market in the study of some issues in the activity of institutional investors in the capital market of our country. Based on the analysis, appropriate conclusions and proposals are formed. Capital market, institutional investor, commercial banks, insurance companies, investment funds, stock, bond. Introduction In the effective implementation of economic reforms in our country, it is important to organize innovative development, create a healthy investment environment, and attract institutional investors to the economy. In this process, it is necessary to attract institutional investors not only to the real sector, but also to the capital market, to create the necessary conditions for their investment, and to develop the capital market by ensuring the participation of institutional investors. Institutional investors are active in the capital market in order to effectively use their financial resources, expand their activities, and especially maximize profits. As a result of increasing the activity of institutional investors in the capital market, it is possible to develop the local capital market, effectively use free funds, increase investment attractiveness, and develop local enterprises. It is necessary to develop the local capital market and increase the activity of institutional investors based on the study of the activities of institutional investors in the capital market of developed and developing countries. By attracting foreign institutional investors, it is possible to develop the capital market in our country, ensure the introduction of new techniques and technologies, develop the infrastructure of the capital market, and increase the activity of institutional investors in the capital market. Therefore, attracting institutional investors to the capital market of our country, expanding their participation, and developing the capital market becomes urgent. Literature Review Researches have been carried out by various scientists in order to effectively establish the activities of institutional investors in the effective formation of the capital market, to create the necessary conditions for their free operation, to increase investment attractiveness, and to ensure the openness and reliability American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 131 www.americanjournal.org of information. “A capital market is an organized market where individuals and businesses buy and sell debt securities and equity securities. It is a major source of funding for companies whose securities are allowed to trade by market regulators, as companies can easily sell their debt obligations and equity to investors. Governments also use capital markets to raise funds, usually by issuing long-term bonds” [1]. The possibility of government participation in the capital market increases the importance of this market. “The capital market is a long-term securities market, usually covering securities with maturities of more than one year. The importance of capital markets for the efficient transfer of funds between borrowers and lenders cannot be overlooked” [2]. It should be noted that the possibility of long-term attraction of capital in the capital market is convenient for capital attractors. It is also necessary to emphasize the importance of the redistribution of funds in the capital market and the development of the economy. "The capital market plays an important role in the efficient use of financial resources and, at the same time, is effective in purchasing long-term financial assets. It also provides an investment opportunity for individuals and financial institutions” [3]. According to foreign scientists R.A.Lambert, C.Leuz, R.E.Verrecchia, "an institutional investor is defined as an investor who has market power and thereby affects information transfer and pricing in the stock market" [4]. These highlighted aspects help to represent the impact of institutional investors on the capital market. F.Wen, K.Zou, X.Wang highlighted a number of features of the activity of institutional investors. "As a legal entity, institutional investors invest in securities using their own funds or public funds. As institutional investors own the majority of assets under management, they play an increasingly important role in the stock market, and their activities are receiving widespread attention” [5]. This indicates that institutional investors can actively participate in the international capital market, both with their own assets and with borrowed capital. In order to widely attract investments to the economy of our country, the issues of "development of local capital markets, in particular, attraction of capital for lending to small and medium-sized business entities through the issuance of bonds" [6] have also been studied on a large scale, and these aspects further increase the importance of the capital market. According to S. Elmirzaev, "in order to attract potential investors, it is necessary to take into account the level of taxation in the country where the investor's activities are organized in the process of making presentations. Because in countries with a high tax burden on dividends, the level of desire to see income by buying shares is extremely low" [7]. In order to develop the capital market, this aspect should also be taken into account by the state. A. Alikulov noted that "the capital market is a market where medium and long-term securities are traded" [8]. He also paid attention to the issues of increasing the possibilities of attracting capital from the capital market, applying foreign experience in the development of the capital market to the national practice. Research Methodology The methods of scientific abstraction, statistical analysis, systematic analysis, comparative analysis, analysis, and synthesis were used to study some issues in the activity of institutional investors in the capital market. American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 132 www.americanjournal.org Analysis and Results If we pay attention to the participation of institutional investors in the capital market of our country, we can say that the indicators of institutional investors indicate that there are a number of issues that need to be resolved in the capital market. In particular, if we study the results of the participation of institutional investors in the trading operations of RFB "Tashkent", we can see that banks, insurance companies, etc. are the main participants (Table 1). Table 1 shows the results of the participation of institutional investors in trade operations at RFB "Tashkent", according to which insurance companies bought securities of banks worth 5933.9 million soums. Moreover, insurance companies bought securities worth 1,754.6 million soums of state-owned companies. Other companies bought securities of banks worth 6535.3 million soums, securities of insurance companies worth 10159.7 million soums. Table 1 Analysis of the participation of institutional investors in the trading operations of RFB "Tashkent" (as of February 1, 2022) № Investors in a short position Investors in the buying position (million soums) Individual Insurance Companies Other Companies 1. Banks 1500,2 5933,9 6535,3 2. State, local government or foreign organizations - - 32607,1 3. Individual investors 13485,7 10,4 700,6 4. Insurance companies 1,7 - 10159,7 5. Other companies 4836,6 - - 6. Companies with a state share - 1754,6 - It is necessary to analyze the profitability of the shares of institutional investors and other joint-stock companies participating in our local capital market in order to attract free money in the hands of the population to the capital market, create conditions for the active participation of local and foreign investors in the capital market, and thereby develop the capital market. Table 2 Analysis of profitability of shares of institutional investors and other joint-stock companies in Uzbekistan (by the end of 2021) [10] № Joint-stock companies Date Amount of dividend (soums) Return on shares (in relation to nominal value, %) Institutional investors 1 "Mirzo Ulug'bek" JSC IF 9.09.2022 312,50 50,00 2 "Olim-F" JSC IF 7.09.2022 50,00 50,00 3 "Capital Bank" JSC 17.08.2022 65,09 6,51 4 AITB "Silk Road". 7.07.2022 0,69 6,90 5 "Alskom Insurance Company" JSC 5.07.2022 138,00 10,00 6 JSC "Trustbank". 29.07.2022 123,00 12,30 American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 133 www.americanjournal.org № Joint-stock companies Date Amount of dividend (soums) Return on shares (in relation to nominal value, %) 7 "DD General Insurance" JSC ST 27.06.2022 30,34 3,03 8 "Global Insurance Group" JSC ST 16.06.2022 30,00 3,00 9 "Gross" insurance company JSC 15.06.2022 290,0 29,00 10 "My Insurance" JSC ST 10.06.2022 124,16 12,00 11 "Baraka" IF 8.06.2022 21,00 21,00 12 "Inson Insurance" JSC 7.06.2022 3,68 3,68 13 "Revenue Plus" JSC IF 3.06.2022 250,00 50,00 14 "Agros Hayot Insurance Company" JSC 3.06.2022 30,34 3,03 15 JSC "Euroasia Insurance" SC 1.06.2022 219,54 22,00 16 "New Life" insurance company JSC 24.06.2022 297,00 29,70 17 Insurance company "Asia Insurance" JSC 26.05.2022 184,30 18,40 18 Insurance company "SQB Insurance" JSC 24.05.2022 5,57 0,56 19 "APEX Insurance" JSC 10.05.2022 39,31 3,93 20 "Ingo-Uzbekistan" insurance JSC 21.04.2022 311,00 23,92 21 "Uzbekinvest" export-import insurance company JSC 9.07.2022 15,22 1,52 22 "Aria" insurance organization JSC 29.06.2022 31,50 3,15 23 "Semurg" IF JSC 26.03.2022 100,00 100,00 24 "Garant Bank" JSC 24.06.2022 1,32 1,32 25 JSC "RAILWAY-INSURANCE" JSC 21.06.2022 227,49 22,75 Other joint stock companies 26 "Kokon Mechanical Plant" JSC 30.06.2022 9,00 1,00 27 Photon JSC 8.07.2022 2328,14 84,70 28 "Biokimyo" JSC 16.09.2022 6175,00 184,30 29 "Ozagrolizing" JSC 14.09.2022 358,79 14,15 30 "Kokon biochemistry" JSC 13.09.2022 83,1 8,10 31 "Galla-Alteg" JSC 6.09.2022 4737,00 1895,00 32 ChEII "Tashkentvino combine" JSC 15.08.2022 4724,00 118,10 33 "Uzkimyosanoat" JSC 10.08.2022 33,78 2,95 34 JSC "Territory Electric Networks". 15.08.2022 2,25 2,25 35 "Uzavtosanoat" JSC 8.07.2022 0,05 5,00 36 "Republican Currency Exchange of Uzbekistan" JSC 6.07.2022 7462,14 746,21 37 "Jizzakh plastic" JSC 4.07.2022 78,14 2,55 38 JV "Uzkabel" JV 27.06.2022 2000,00 133,33 39 "Tashkent RFB" JSC 4.07.2022 24,85 0,97 40 "Tashkent products" JSC 20.09.2022 164,26 54,00 Table 2 presents the analysis of stock returns of institutional investors and other joint-stock companies in Uzbekistan. In this table, 25 institutional investors (4 commercial banks, 5 investment funds and 16 insurance company) and 15 other joint-stock companies. Among institutional investors, the highest rate of return on shares compared to the nominal value was recorded by "Semurg" IF JSC (100%), while the investment funds of "Mirzo Ulugbek" JSC IF, "Olim-F" JSC IF, "Daromad Plus" IF JSC recorded 50% ranked next in terms of profitability. It should be noted that the lowest indicators belong to insurance companies. In particular, "SQB Insurance" SK JSC (0.56%), "Uzbekinvest" export-import insurance company (1.52%), "Global Insurance Group" JSC ST (3.00%), "Agros Hayot insurance American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 134 www.americanjournal.org company" JSC (3.03%), "DD General Insurance" JSC ST (3.03%), "Aria" ST JSC (3.15%), "Inson sugurta" JSC (3.68%), "APEX Insurance" The return on shares of insurance companies such as AJ (3.93%) did not even reach 4%. If we study at the level of commercial banks, the lowest indicator belongs to "Garant Bank" JSC (1.32%). However, the performance of other analyzed banks is not satisfactory. If we analyze the profitability of shares of other joint-stock companies, the lowest indicators are for "Tashkent RFB" JSC (0.97%) and "Ko'kon Mexpnika Zavodi" JSC (1.00%), and the highest indicators are for "Galla-Alteg" JSC (1895.00%) and "Republican Currency Exchange of Uzbekistan" JSC (746.21%). Figure 1 shows the volume of transactions with securities at RFB "Tashkent" over the years, from 0.3 trillion soums in 2017 to 4.8 trillion soums in 2022. The significant increase of this indicator in recent years is due to the fact that public offering of stocks is organized in the national practice and due to the implemented measures. Figure 1. The volume of transactions with securities at RFB "Tashkent" (trln. soums) [11] If we pay attention to the market capitalization of freely traded securities in countries relative to GDP, it can be seen that the indicator of our country is much lower than other countries (Figure 2). In particular, the indicators of countries with developed capital markets, such as the USA and Singapore, were 195% and 192%, respectively, while in Kazakhstan this indicator was 27%. In Uzbekistan, the market capitalization of freely traded securities in relation to GDP is 0.38%. 0.3 0.7 0.4 0.6 1.2 4.8 0 1 2 3 4 5 6 2017 2018 2019 2020 2021 2022 American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 135 www.americanjournal.org Figure 2. Market capitalization of freely traded securities in countries relative to GDP (January 2023) [11] Based on the above analysis, we should note that the profitability level of the shares of most of the participants of the local capital market is not satisfactory. In order to attract free funds of potential investors to the capital market, the profitability of securities in the capital market should be at a satisfactory level. Otherwise, potential investors can direct their funds to bank deposits or other business activities based on their potential and experience to get more income. Conclusions The following conclusions were formed in the study of some issues in the activity of institutional investors in the capital market. First of all, most of the local capital market participants' shares are not at a satisfactory level of profitability. In order to attract free funds of potential investors to the capital market, the profitability of securities in the capital market should be at a satisfactory level. Otherwise, potential investors can direct their funds to bank deposits or other business activities based on their potential and experience to get more income. Secondly, in order to develop the capital market in Uzbekistan and increase the activity of institutional investors in it, we believe that it is appropriate to focus on attracting foreign institutional investors as investors or financial intermediaries. Therefore, it is necessary to create conditions for foreign institutional investors, especially foreign banks and investment intermediaries, to participate in the local capital market. In particular, it is necessary to provide foreign banks and investment intermediaries with the opportunity to carry out securities underwriting activities without obtaining a license. In this case, it is necessary to develop special requirements and criteria for foreign banks and investment intermediaries to carry out securities underwriting activities without obtaining a license. Thirdly, we believe that it is appropriate to develop measures to increase the participation of these banks in the capital market, taking into account the large number of commercial banks with a state 195% 192% 69% 33% 27% 0.38% 0% 50% 100% 150% 200% 250% USA Singapore Vietnam Turkey Kazakhstan Uzbekistan American Journal of Business Management, Economics and Banking Volume 32 January - 2025 P a g e | 136 www.americanjournal.org share in the commercial banks of our country. In particular, it is necessary to effectively establish the activities of investment intermediaries in the stock market by commercial banks with a state share. Through this, the intermediary activities of commercial banks will be established in the capital market, and it will be possible to increase the activity of institutional investors. References 1. https://www.accountingtools.com/articles/what-are-capital-markets.html 2. Zaheer Ahmed, Michel Raj, S. Prakash, P. Natarajan, Jonardan Konear. 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