(Bloomberg) -- The reverberations from political upheaval in Georgia are spreading as far as London’s stock market.

UK-listed shares of TBC Bank Group Plc, Georgia Capital Plc, and Bank of Georgia Group Plc have all fallen more than 20% this month, rattled by the passing of a controversial “foreign agent” law that Georgia’s president says puts the country’s chance of joining the European Union at risk.

READ: Georgia President Says EU Dream At Risk Over ‘Foreign Agent’ Law

The declines mostly erased year-to-date gains in the stocks, all of which have set record highs in 2024, boosted by Georgia’s robust macro-economic outlook. Investor sentiment has been shaken by the progress of the bill, which the EU and the US say is similar to one employed by Russia to crush pro-democracy groups and media.

TBC Bank and Bank of Georgia declined to comment. Georgia Capital didn’t respond to a request for comment.

“Georgia is in a very precarious position,” said Alessio Chiesa, emerging markets economist at Wood & Co. “They operate a wide current account deficit and depend heavily on the West for capital, but investors worry that with the bill the new Prime Minister is signaling his intent to position the country closer to Russia.”

Irakli Kobakhidze, who became prime minister in February, insisted on Monday that the government would press ahead with the law, even after President Salome Zourabichvili vetoed it. Kobakhidze said the law is aimed at increasing transparency over the foreign funding sources of non-governmental organizations and media.

The fallout from the bill has sent reverberations through currency markets, and on Thursday the National Bank of Georgia intervened to stabilize the lari.

“This is a pure example of geopolitics influencing investing,” said Michael Churchill, president of Churchill Research Inc.

According to Churchill, investors have been attracted by TBC which he describes as a “hugely profitable” bank with “enormous” margins and return on equity gives it the ability to pay big dividends and grow the loan book.

Next Hurdle

Bank of Georgia has had a premium listing in London in 2012, splitting off investment firm Georgia Capital through a demerger in 2018. TBC Bank joined the LSE through a sale of global depositary receipts in 2014, becoming the then-largest IPO from Georgia with a market value of $640 million.

Listing in London gave the businesses enhanced access to capital and liquidity, as well as increased visibility in international markets, according to Wood & Co.’s Chiesa.

The next hurdle for the stocks is likely to come this week when the bill is considered by the Council of Europe’s Venice Commission, an advisory body on constitutional law. After that, elections scheduled for October will allow Georgians to show “that what they want is Europe and nothing else,” Zourabichvili said in an interview with Bloomberg TV.

Until then at least, uncertainty and market volatility look likely to persist.

“What expectation can we have?” former Georgian central banker Giorgi Kadagidze told Bloomberg. “We can forget about new western investors, and the existing investors will turn away too.”

--With assistance from Helena Bedwell.

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