Exchange Summaries. Mess and Disorder
During the first nine months of 2007, Kazakhstan Stock Exchange’s (KASE) transactions in all sectors, including the special trading floor of the Almaty Regional Financial Centre (RFCA), totalled $265,543.8 million or 32,623.2 billion tenge, a year-on-year growth of 2.1 times in dollar terms and 2.06 times in tenge terms (Table 1).
In October, the value of transactions closed at KASE went down by 4.6% in dollar terms as compared with the previous month and totalled $26,999 million (Table 2). In tenge terms, the fall was 5.8% and the value of transactions 3,262.4 billion. Comparing to October 2006, the value of transactions increased 1.25 times in dollar terms and 1.18 times in tenge terms.
Government Securities Market
The value of purchase and sale transactions with government securities, including bonds issued by local executive bodies, was 905.8 billion tenge ($7,350.8 million), a 1.74-times year-on-year increase in tenge terms (1.77 times in dollar terms) (Table 3).
Sixteen companies traded in government securities, with the top ten most active traders in KASE’s K category accounting for 80.7% of all transactions in this segment. The top ten by share of transactions in the overall turnover of trades (the sum of purchased and sold securities) on the secondary market was as follows: Citibank Kazakhstan (18.1%), HSBC Bank Kazakhstan (13.5%), RBNT Securities (9.1%), Bailyk Asset Management (8.2%), Asia Broker Services (7.4%), Bank Caspian (5.8%), Halyk Savings Bank of Kazakhstan (4.9%), Sberbank of Russia (4.7%), TuranAlem Securities (4.6%), and ABN AMRO Bank Kazakhstan (4.5%). The rating of every player was determined in tenge terms, taking into account only open-trade transactions closed at KASE.
It should be noted that the Finance Ministry arranged two MEKAM auctions on the primary market, with all transactions closed.
The secondary market showed a serious decrease in the number of transactions against an increase in the profitability of most instruments. The weighted average yield on the National Bank’s notes went up from 4.51% in January to 9.22% in October.
The Finance Ministry’s bonds also improved their yield significantly: in October, this indicator averaged 11.78% against a maximum of 8.15% during the preceding nine months. The National Bank’s 28-day notes also showed an increase in their yield to 5.5% p.a.
This trend is probably due to the reassessment of risks which is now underway in Kazakhstan, as well as to the growing pressure of inflation. We should remember that, according to official statistics, consumer prices in the country grew by 4.4% in October.
During the nine months of 2007, the value of share purchase and sale transactions closed at KASE, including RFCA’s special trading floor, came up to $6,023.1 million or 737.3 billion tenge (Table 4), a year-on-year increase of $4,670.8 million (366.8 million tenge) or 2.1 times (2 times).
A total of 54 companies took part in trading, with the ten most active KASE members in A, P and H categories accounting for 78% of the overall equity turnover (including KASE’s main floor and RFCA’s special trading floor). Rated according to their share in the overall value of transactions, the top ten is as follows: Vernyy Kapital (21%), Almaty Financial Centre (12.3%), BCC Invest (11%), VISOR Capital (8.6%), Kazkommerts Securities (8.1%), Asia Broker Services (4.2%), First Broker House (3.6%), ABS Securities (3.2%), Asyl Invest (3.02%), and Bailyk Asset Management (2.97%).
It should be noted that after a two-month nosedive, the share market is beginning to stabilise – in October, the total value of transactions closed doubled. After Standard & Poor’s has downgraded Kazakhstan’s credit ratings to BBB- and the National Bank has distributed data on the reduction in the deposit base of the banking sector and rising inflation, the beginning of October was rather tense for domestic companies. Yet, despite a slight downward trend at the beginning of the month, in its end the market closed with rather positive indicators. This dynamics were boldly illustrated by the KASE index – the strongest fall (by 7.3% as compared with the previous day) happened on 4 October, but it quickly adjusted in the subsequent days.
If to consider the issuers, in October, the prices of ordinary shares of the Halyk Savings Bank of Kazakhstan, Bank TuranAlem and KazMunayGas E&P grew by 44.3%, 14.9% and 9.7% respectively. Ordinary shares of Kazkommertsbank and Kazakhtelecom went down in value by 24.4% and 2.5% respectively. The steepest fall in prices was in that of ordinary shares of Alliance Bank: from the beginning of the month, they went down by 72.5% to 17,000.01 tenge per share.
The most serious falls in the prices of securities of Kazakh second tier-banks were recorded in external markets, which is generally in line with investor anxiety over the banking and construction sectors. In October, the prices of GDR of the Halyk Savings Bank of Kazakhstan traded on LSE were down by 7.6%, Kazkommertsbank 10.4%, and Alliance Bank 15.4%.
While banks’ quotations were falling, a steady growth was shown by equities in the industrial sector – KazMunayGas E&P (+8.5%) and Kazakhmys Plс (+5.5%). This rise is in line with the situation happening in the international raw material markets that have experienced a deficit in supply of all main commodities. As for Kazakhmys Plc, another trigger was the message that the company was diversifying its assets by buying an 18.8% stake in Eurasian Natural Resources Corporation Plc.
As for the October statistics on the whole, a rise in the weighted average daily prices at KASE was shown by 37% of the shares traded, a fall by 46%, and a steady price by 15%. The prices of 2% of shares had no index to compare with. Compared to September, the respective indicators were 42%, 52% and 6%. The biggest changes in October were recorded in the prices of the shares of LNAT (London-Almaty Insurance Company; up 463.5%) and ZNGRp (Zangar Kazakh Republican Trade House; down 87.1%).
Table 5 shows the liquidity rating of the listed companies whose shares were traded at KASE in October 2007. These companies account for 75.5% of the total turnover. A total of 49 shares were traded in KASE’s secondary open market.
Corporate Bond Market
During the first nine months of 2007, the value of purchase and sale transactions with corporate bonds closed at KASE, including RFCA’s special trading floor, totalled $3,631.8 million (445.4 billion tenge), a year-on-year increase of $1,028.7 million (39.5%) in dollar terms, or 117.9 billion tenge (36%) in tenge terms.
A total of 38 operators took part in the transactions in the period, accounting for 88.7% of the turnover in the open market in corporate bonds. The top ten most active KASE traders in A, P and H categories are as follows: TuranAlem Securities (28.3%), Asia Broker Services (22.4%), Astana Finance (10%), Bailyk Asset Management (9.6%), the CAIFC Company (4.9%), First Broker House (3.5%), BCC Invest (3.4%), Bank CenterCredit (2.6%), Almaty Investment Management (2.1%), and Kazkommerts RFCA (2%). The rating only includes information on open transactions, with the position of each player accounted for in the tenge.
In October, all market segments, including RFCA’s special trading floor, recorded 352 transactions with corporate bonds to a tune of 39,766 million tenge, or $329.1 million at the rate in effect at the closing date. This is 43.3% of the monthly volume of transactions with non-government securities (vs. 76.5% in September) and 1.2% of all transactions closed (3.1%).
Thus, in October, players in the corporate bond market did not manage to keep the pace of transactions they had in September. The market returned to its ordinary indicators having shown a 51% decrease in dollar terms (51.4% in tenge terms). The situation in this segment was generally steady, although, similarly to September, the “internal” transactions with BTASb7 which accounted for 26.9% of the total October turnover should be noted. As before, the market showed low liquidity of the instruments traded and a gradual decrease in prices.
The weighted average net price of corporate bonds traded in the secondary market went down from 96.13% in September to 95.29% in October. Seventy-three corporate bonds showed an increase in their yield to maturity, while 30 recorded a downward trend. Six securities had no index to compare with.
Foreign Exchange Market
During the nine months of 2007, the volume of forex transactions closed at KASE reached $71,942.6 million, a $44,590.5 million or 2.6 times increase year-on-year. In tenge terms, the growth was 2.57 times (Table 7).
According to the Irbis information agency, the weighted average KZT/USD rate computed for all transactions closed in the main/morning sessions of KASE from 1 January to 31 October 2007 was 123.24 tenge per dollar, and that for all transactions closed at the exchange 122.97. As at 31 October 2007, the tenge’s appreciation to the dollar was estimated at 5.8% p.a. In nominal value, the tenge’s appreciation to the dollar stood at 4.8% in January-October (5.1% in 2006).
A total of 24 second-tier banks took part in forex transactions at KASE, with the most active being Alliance Bank (16.71%), ABN AMRO Bank Kazakhstan (16.67%), Kazkommertsbank (15.5%), Nurbank (11.6%), Citibank Kazakhstan (5.4%), Bank TuranAlem (4.7%), Halyk Savings Bank of Kazakhstan (3.32%), Bank Caspian (3.28%), Bank CenterCredit (2.9%), and ATF Bank (2.4%). Each bank’s position was defined according to its share of the transactions in overall dollar, euro and rouble trades in KASE’s trading system. The position of each bank was expressed in total tenge equivalent at the exchange rate in effect at the closing date. The ten leaders accounted for 85.8% of the total foreign exchange trades.
In Kazakhstan’s forex market and in the USD market in particular, October was a waiting period. Market players abstained from active trading that was fully reflected in the transactions with the US currency. The decisive steps taken by the National Bank in this segment raised no doubt that the attempts to “swing” the rate were useless. That was the reason why in October this market demonstrated rather a dull trading in the demand and supply, while the latter two showed reasonable balance.
Yet, it should be noted that this situation seemed rather flimsy. The balance of payments in the first six months of the year, stagnation in some segments of the construction industry, a fall in prices of the real estate (the scale of which remained uncertain), and continual withdrawal of deposits from banks drew a rather unpleasant picture.
Nevertheless, the month did not show any serious grounds to forecast a forex catastrophe. The factors that affect the market neutralised each other and the situation did not change during November. There all grounds to believe that it will not change until the end of this year. The market is unlikely to demonstrate record-high volumes or surprise with exchange rate dynamics.
As is shown in Table 8, during the nine months the volume of repo transactions at KASE increased by 1.95 times in tenge terms (1.99 times in dollar terms) to 21,687.8 billion tenge ($176,595.2 million) when compared to the same period of 2006.
In January-October, 68 companies took part in repo transactions apart from the National Bank. The leading traders that accounted for 60.5% of this segment are: Halyk Savings Bank of Kazakhstan (15.4%), Bank CenterCredit (8.8%), Kazkommertsbank (5.8%), Asia Broker Services (5.6%), Zhetysu (5.5%), Temirbank (4.18%), ATF Bank (4.17%), Bank Caspian (3.8%), Eurasian Bank (3.7%), and Alliance Bank (3.6%). A company’s rating was defined according to the share of its transactions in the overall turnover of trades (the sum of purchased and sold instruments in the repo opening/closing transactions). All repos were accounted for disregarding the sector (automatic repo or direct transactions) and instruments (government or non-government securities). The position of every trader was expressed in the currency of the transactions, i.e. the tenge.
In October, the repo sector recorded 8,162 transactions to a tune of 2,535.0 billion tenge or $20,979.5 million at the rate in effect as at the closing date, which is 77.8% of the total monthly turnover of KASE (in September 2007, this figure was 67.3%).
October became the first month when repo rates decreased to the normal level they had before the crisis. A distinctive feature of this October was that the traders showed a wait-and-see attitude in almost all sectors of the organised financial market. The reserved position of banks in the domestic forex market and brokers and their clients in the securities market, coupled with a renewed inflow of deposits from individuals and legal entities to the banking system, has formed a certain margin of tenge liquidity that has resulted in supplying short money in the repo segment. Due to this factor, overnight repo rates in some October transactions fell to 0.1 p.a., while the weighted average TONIA indicator decreased from 7.3% to 4.43% p.a.
Disclaimer: the above information should not be considered as an offer or recommendation to sell or purchase securities at KASE. Using this information by any persons to make investment decisions should not entail author’s responsibility for any possible losses or damages resulting from such investment decisions.
By Tatyana Kudryavtseva based on information provided by Irbis
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