CORPORATE BONDS MARKET OF KAZAKHSTAN

Building Domestic Debt Markets ConferenceBudapest, May 12-14, 2003

Azamat Joldasbekov

President / Kazakhstan Stock Exchange (KASE)

The Most Successful Sampleof Corporate Bonds Market in CIS

Kazakhstan 2.58%

Russia 0.74%

Ukraine 0.38%

Kyrgyzstan 0.15%

Other 0.00%

Volume of corporate bonds markets in 2001, % of GDP

Source: S.Lialin (Cbonds Co. / S-Petersburg, Russia)

Why? Just Follow the Rules

• The Market Is Where the Investors Are

• Stimulate the Market With the Tax

Regime and Portfolio Investments

Regulation (0% taxes for the main types

of investors and the flexible limits of

investments in corporate securities for

institutional investors)

The National InvestorsThe corporate bonds market of Kazakhstan is driven by

the assets of the private accumulative pension funds (PAPF) and the commercial banks

As for 01.01.03 the assets of the

commercial banks are equal to 7,39

USD bln, of the private accumulative

pension funds – 1,25 USD bln,

in total – 8,64 USD bln (35,94%

of GDP)

National Investors: Some Facts

• Pension reform in Kazakhstan was launched in 1998. The same year the first private accumulative pension funds have appeared

• There is State Accumulative Pension Fund (27,6% of total pension assets) but now it is not authorized to invest in corporate securities

• The impact of the individual investors and insurance companies is invisible

Foreign Portfolio Investors

There are NO foreign portfolio investors in the bonds market of Kazakhstan: the yield is too low due to the excess of the domestic investors appetite over the

domestic bonds supply

Yield of Kazakhstan Corporate Bonds (% p.a.)

Face Value of the Listed Bonds (USD mln)

Trade Turnover of the Listed Bonds (USD mln)

The Trade Volume is LowerThan the Total Face Value

The reason is the same: the hungry national investors prefer to keep the bonds till maturity

Ratings of Kazakhstan BorrowersS&P Moody's Fitch

Kazakhstan, the Republic of BB Baa3 BB+

Kazakhstan Railroads BB Ba1 BB+

Kazakhoil B1 BB-

Kaztransoil BB BB

Development Bank of Kazakhstan BB Baa3 BB

Kazkommertsbank BB- Ba1 BB

TuranAlemBank BB- Ba1 B+

Halyk Savings Bank of Kazakhstan BB- BB

What Do We Expect?• The evolution growth of the national

corporate bonds market (up to 10% of GDP and more)

• The growing interest of foreign portfolio managers to Kazakhstan corporate eurobonds

• The appearance of foreign bonds in Kazakhstan market (cheaper cost of borrowings)

Need to Know More?

www.kase.kz