JSC Kazakhstan Stock Exchange President Kadyrzhan DAMITOV:
NEW DEFAULTS POSSIBLE
Aftershocks of the global financial crisis of 2008 are still
impacting on the current economic situation in Kazakhstan. Kadyrzhan DAMITOV,
the president of JSC Kazakhstan Stock Exchange (KASE) shared with Interfax-Kazakhstan
his opinions about perspectives of Kazakhstan's stock market, behavior of investors
and the future of stock trades.
- Mr Damitov, how would you describe the current status of Kazakhstan's
- Kazakhstan goes second after Russia if judging by the stock
trading volume. We are ahead of Ukraine in terms of total trading volume, average
daily volume, stock market capitalization, corporate and government bonds. In
addition, Kazakhstan's legislation and infrastructure are in some respects better
than those in the other CIS states. Our legislation places virtually no restrictions
on foreign investors working in our market, unlike in other CIS countries. Our
partners from the other CIS states recognize that Kazakhstan is more prepared
for integration in terms of its infrastructure and legislation.
In 2010 real GDP of Kazakhstan grew 7%, which is the maximum growth
rate over the past three years. Our three largest banks completed their debt
restructuring. The year 2010 saw a significant reduction in the number of listed
companies that defaulted on bonds. A number of Kazakhstan's big companies have
successfully completed their programs for bond issue on the domestic and foreign
stock markets. On the domestic stock market alone the listed companies attracted
64.8 billion tenge, or around $438.8 million in 2010, which is a record amount
However, there are some problems that hinder further development
of the domestic stock market. The biggest problem is that the Kazakh issuers
of securities do not view the stock market as main funding base. They cite such
reasons as low liquidity of the market, reluctance to disclose full information
about their activities to an unlimited number of investors, investors' low demand
due to high credit risks or poor brand recognition.
Besides, the existing payment system does not allow the foreign
investors to boost their activities in Kazakhstan. Some restrictions the financial
supervision agency introduced as part of its crisis response measures for banks,
pension plans and other institutional investors also greatly impede development
of certain segments of the stock market.
Nevertheless, the government bond market is well developed in
Kazakhstan and Kazakhstan's Finance Ministry and National Bank successfully
operate on this market.
Currently, KASE is carrying out a number of projects to address
these problems of the market. After the barriers are removed, Kazakhstan's stock
market will strengthen its position.
- What are your predictions about the stock market this
year? How many new issuers do you think will come onto the market? How many
may get de-listed? Do you expect any defaults and what new instruments will
- Despite the fact that the real sector is suffering a certain
shortage of financing sources, Kazakhstan's companies are, nevertheless, not
very active in the primary stock market. The companies do not place shares very
often as it would require new capital investments from the existing shareholders
or the shareholders would have to agree to a lower stake in the company if shares
are sold to other persons. More often the companies place bonds, however this
instrument is only used by the companies of high credit quality whose needs
for borrowed funds are not very acute, unlike the second- and third-grade companies.
It would be too expensive for the second- and third-grade companies to place
bonds as their credit risks are high.
As far as new listings are concerned, it would be a great achievement
if the number of KASE listed companies, which has been falling since 2009, went
up again. In 2008 we had 144 listed companies and only 107 today.
I do not rule out the possibility of new defaults. Unfortunately,
after a quiet period three new companies have defaulted this year. They were
the companies that never failed to meet their liabilities before.
There will be new tools. First of all, these are shares of a large
state-owned company, which, we hope, will be floated on the market this year
as part of the "People's IPO" Program. There may be new futures contracts
for most tradable shares or for a new KASE_5 Index, which is under development
now, which will be assigned to the shares of Kazakhstan's companies that trade
their securities on foreign markets. KASE is also considering the possibility
of launching yuan/tenge trades.
- Earlier there were reports that KASE may sell some
of its shares to foreign investors, probably to Asian partners. Are these plans
still on the table? If yes, who are the foreign investors you are in talks with?
- There is no specific plan to sell KASE shares. Such a possibility
was discussed in the context of KASE's IT infrastructure development. KASE together
with the regulator and market participants is developing a plan for the further
modernization of the stock exchange IT-systems and infrastructure. If the project
requires additional financing, shareholders may consider issuing new shares
targeted at an international strategic partner. But I have to reiterate that
no legal decisions have been made yet.
- Kazakhstan has announced plans to hold a "people's
IPO" for a number of national companies. Do you think that campaign will
achieve its goals and people will take an active part in the IPO? What companies
can go for this IPO?
- The history of the world economy shows that an IPO, especially
that for national companies, helps very much to develop the stock markets. However,
we should bear in mind that it is up to the companies to decide if they will
go for an IPO or not. There are a lot issues to be resolved in connection with
the planned IPO and we are working on them now.
The level of financial literacy is still low, though a considerable
progress has been made in this areas in recent years, also thanks to the training
programs of the Regional Financial Center of Almaty. In this context, we expect
that the population will take an interest in this program. We cannot give any
figures but hope that there will be thousands of interested people.
As far as companies are concerned, such issues as expediency,
preparedness, priority, etc. are being actively discussed by JSC National Welfare
Fund Samruk-Kazyna. So, it is too early to talk about it.
- Thank you for your time!
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