EXCHANGE MARKET OF KAZAKHSTAN

The 3rd Asia-Pacific New Markets Forum

Busan Korea, June 15-17, 2006

Idel Sabitov

First Vice-president / Kazakhstan Stock Exchange (KASE)

KAZAKHSTAN STOCK EXHANGEKAZAKHSTAN STOCK EXHANGE

• Closed joint stock company

• Non-commercial self-regulating

organization

• Organized in November 1993

• Only one stock exchange in Kazakhstan

• 66 members (30 banks)

• Closed joint stock company

• Non-commercial self-regulating

organization

• Organized in November 1993

• Only one stock exchange in Kazakhstan

• 66 members (30 banks)

1. Foreign currencies

2. Equities

3. Сorporates bonds

4. Treasury bills

5. Money market (repo operations)

6. Derivatives market is non-active now

KASE is an universal financial market. KASE is an universal financial market. There are five main trading floors on KASEThere are five main trading floors on KASE

Historical data

1993 November 17– Kazakhstan Interbank Currency Exchange was organized as an joint company based on Center of interbank currency operations in National Bank of Republic of Kazakhstan.

1995 July 12 – name of exchange was changed to “Kazakhstan Interbank Stock and Currency Exchange".

1995 September 29 – KASE obtained license № 1 from National Securities Commission for organization trade operation on treasury bills.

1995 October 27 – began trade operation by electronic trade system.

1996 April 12 – changed name to “Kazakhstan Stock Exchange“ - KASE.

1996 November 13 – obtained full license of National Securities Commission for exchange operation on securities market.

1997 September 01 – divided on two exchanges – AFINEX (Almaty FINancial EXchange) and KASE. AFINEX was operated by currency and derivatives instruments. KASE had operated in stock and Tbills markets because there was law requirement to separate different markets.

1997 September 19 – first trade on shares.

1997 November 05 – first trade on program of government privatization.

1998 August 28 – foundation of own information agency “IRBIS”.

1999 – began pension reform in Kazakhstan. It was started with accumulating pension funds.

1999 April 01 – back merged AFINEX and KASE in one - KASE.

2001 March – began calculate stock indexes (KASE_Shares, KASE_BY, KASE_BP).

2001 August 01 – opened special sector “automated repo operation” in money market.

2003 – turnover of all exchange markets increased to 33,8 billion dollars 113,1% of GDP Kazakhstan in 2003, but almost of this volume is a money market (63%) and foreign currency (18,9%).

2005 – turnover of all exchange markets increased to 80,4 billion dollars 143,9% of GDP Kazakhstan in 2005, corporate securities market still small share in all turnover – 3,4% (2,8 bl.).

Index KASE_Shares grown to 646,42 points from 213,37 (202,95 %).

Capitalization increased to 10,5 billion dollars from 3,94 billion dollars.

2006 – market now is very interesting for investors in spite of not good liquidity still because Index KASE_Shares had maximum value April 19 - 2.393,5778 points, and Capitalization increased to 31,2 billion dollars.

Turnover from 1993, USD’ 000 000 000

80,4

58,9

33,8

24,6

10,25,13,51,53,0

0,05 1,2 2,0 2,9

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Foreign currency Futures

Treasury bills Stock and bonds

Money market

GDP of Kazakhstan

Volumes of markets in 2005, USD’ 000 000 000

repo on Treasury bills: 0.9% 0.7

Foreing currency:15.0% 12.0

Money market on treasury bills69.1% 55.6

Corporate securities: 3.4% 2.8

Treasury bills: 5.9% 4.8

Direct money market on corporate securities:3.2% 2.5

KASE$80.4 bn.

repo on securities:

2.5% 2.0

Index KASE_Shares form 2005 Jan 01 to 2006 June 09

0

500

1 000

1 500

2 000

2 500

05.0

1.05

05.0

2.05

05.0

3.05

05.0

4.05

05.0

5.05

05.0

6.05

05.0

7.05

05.0

8.05

05.0

9.05

05.1

0.05

05.1

1.05

05.1

2.05

05.0

1.06

05.0

2.06

05.0

3.06

05.0

4.06

05.0

5.06

05.0

6.06

09/06/06:1 702,01

05/01/05:216,34

Corporate bonds

64 issuers 173 issues10,6 billion

USD

Corporate shares

64 issuers 91 shares31,8 billion

USD

Capitalization of listing securities onCapitalization of listing securities on KASE at 2006 June 12KASE at 2006 June 12

Ratings of Kazakhstan Borrowers

S&P Moody's Fitch

The Republic of Kazakhstan BBB- Baa1 BBB

Kazakhstan Railroads BB+ Baa1 BBB

Kaztransoil BB+ Baa2 BB+

Development Bank of Kazakhstan BBB- Baa1 BBB

Kazkommertsbank BB+ Ba1 BB+

TuranAlemBank BB Ba1 BB+

Halyk Savings Bank of Kazakhstan BB Ba1 BB+

ATF Bank B+ Ba1 BB-

Current situations

Reasons of listing for companies In main all issuers looking for big institutional investors like banks and pension funds

Two main reasons:

1) issue bonds to sell it pension funds

2) to have tax privilege of profit for buy and sell securities

0

1

2

3

4

5

6

7

8

9

1999 2000 2001 2002 2003 2004 2005

Volume of netpension assets

Capitalization of exchange’scorporate bonds market

bn. USD

0

1

2

3

4

5

6

7

8

9

1999 2000 2001 2002 2003 2004 2005

Volume of netpension assets

Capitalization of exchange’scorporate bonds market

bn. USD

Plans and expectationsIn next two years market is waiting several IPO from big companies with government control like:

Eurasian industrial association (EIA), Temir Zholy (railroad and transport company), KazMunaiGas, Air Astana, TuranAlemBank, Kazkommertsbank and etc.

20% of this IPO companies have to offer in domestic market.

May be some parts of IPO will be resell in the future. For example Kazakhmys company has plans to resell 1% of shares in KASE now.

ImprovesWe think also that grown of mutual funds in Kazakhstan and increase activity of retail in stock market will be do this market more interesting and liquidity.

We think about to set T+3 settlements procedures and clearing procedures.

Now we have settlements procedures based on DVP principle T+0 time each deals separately.

It’s will be more convenient for foreign investors.

Need to Know More?

www.kase.kz