The present states of affairs at the financial market of Kazakhstan in July of year 2006 - National Bank

/IRBIS, Natalya Kuznetsova, August 16, 06/ - The National bank of Kazakhstan has spread today the press release, saying: Quotation start 1. Inflation. According to official data of Statistics agency of Republic of Kazakhstan inflation in July of year 2006 was equal to 0.2% (in June of year 2006 - 0.3%). Prices for foodstuffs decreased by 0.4%, nonfoods became more expensive by 0.9%, chargeable services- by 0.5%. In July of year 2006 eggs among foodstuffs got cheaper by 4.6%, sugar - by 2.5%, fruit and vegetables - by 1.7%, butter and oil - by 0.4%, fish and sea products - by 0.2%. The prices growth was registered for cereals by 0.9%, for rice - by 0.7%, for meat and meat products - by 0.2%. In the group of nonfoods there was observed the meaning growth of prices for petrol by 6.5%. Together with that clothes and shoes became more expensive, household goods, prints, merchandize of the personal hygiene - by 0.4% each. Transport services among chargeable public services got cheaper by 2.0%, services of cultural and educational institutions - by 0.6% each, medical services - by 0.5%. Tariffs of housing and communal services increased by 0.3%. At that, scavenging became more expensive by 3.4%, natural gas supply services - by 0.6%, water supply services - by 0.4%, electric energy - by 0.1%. Since the beginning of year 2006 the prices growth at the consumer market totaled 5,1% (within January-July of year 2005 - 4.0%). Prices for foodstuffs grew by 5.0% (4.7%), for nonfoods - by 3.4% (2.5%), for chargeable public services - by 7.0% (4.0%). In July of year 2006 inflation in its year expression totaled 8.7% (in December of year 2005 - 7.5%), foodstuffs rose in price by 8.4%, nonfoods - by 6.8%, chargeable services - by 11.1%. 2. Money instruments. The growth of net external and domestic assets of The National Bank in July of year 2006 was a reason for the enlargement of the monetary base by 9.8% to KZT1,162.9 bn. Narrow monetary base, that is, monetary base without taking into account fixed-date deposits of second tier banks in The National Bank, expanded by 26.2% to KZT1,060.0 bn. In June of year 2006 money stocks increased by 7.6% to KZT2,704.1 bn. Increase of net domestic assets of the banking system made for the growth by 15.7%, whereas net external assets reduced by 30.4%. There was an increase of cash in circulation in June by 9.3% to KZT550.0 bn., and deposits in the banking system - by 7.1% to KZT2,154.0 bn. Forestalling of thee rate of the cash growth compared to deposits in June caused a decrease of the stake of the last one in the structure of money stock from 80.0% to 79.7%. Forestalling of the rate of money stock's growth compared to the rate of the enlargement of the money base in June call forth an increase of the multiplier from 2.41 to 2.55. 3. Currency market. In July of year 2006 there were observed various tendencies at the currency market. Tenge strengthening, which took place in the first two ten-day periods of July, changed into its weakening in the third ten-day period. Tenge weakening was carrying on at the beginning of August. Changes of the tendencies in dynamics of tenge rate are connected to the effect of two factors, which entailed the growth of demand for foreign currency. Firstly, since July 1 , 2006 the mechanism of the formation and use of finances of the national fund, and modification of the tendency occurred following the so-called "tax week", which is characterized by higher demand for tenge. Possibly, economical subjects increased demand for the foreign currency past the tax payments. Besides that, by Resolution of Board of directors of National bank of Republic of Kazakhstan #67 dated July 25, 2006, there were approved Rules of conversion and re-conversion of assets of The National Bank of republic of Kazakhstan. In compliance with the specified Rules, The National Bank (similar to the practice The Central bank of Norway) can also purchase foreign currency at the domestic at the expense of tenge, received in the National fund, on level with selling of foreign currency out of gold and exchange currency assets. In August The National Bank made three operations on purchase of foreign currency at the domestic market by order of the National fund in the size of $315.8 m. Secondly, since July 12 of the current year the new rules on minimal reserve requirements have taken effect. Second tier banks have started calculate the minimal reserve requirements in accordance with the new rules since July 18, and since July 20 - have initiated the formation of reserve assets. Amendments into the rules led to an increase of the minimal reserve requirements, which, in its turn, called forth the growth of reserve assets. Together with the above-said, there were included in the list of reserve assets remains in foreign currency in correspondent account of banks in The National bank. As a result, totals in the mentioned accounts of banks have increased meaningfully since July 20. In all, in July of year 2006 nominal exchange's tenge against dollar rate did not change. By the end of July, as it was by the end of June, it made KZT118.41 per dollar (since the beginning of the year - strengthening by 11.48%). Tenge against dollar rate fluctuations appeared in the scale of KZT117.25 - 118.49 per 1 dollar. Weighted average exchange's rate within seven months totaled KZT125.57 per USD dollar. In July volume of exchange's transactions on Kazakhstan Stock Exchange, taking into account deals at additional trades, increased, compared to June, by 15.5% to $1728.3 m. (since the beginning of the year - $14.2 bn.). Volume of transactions at the off-exchange currency market decreased by 7.7% and made $5671.8 m. (since the beginning of the year - $32.0 bn.). Within the period of since August 1 to August 11 of year 2006 it was viewed the gradual weakening of tenge rate at the domestic currency market by 3.5% relative to USD dollar. Exchange's tenge rate as of August 11 made KZT122.58. At that, the total volume of exchange's transactions on Kazakhstan Stock Exchange totaled $1398.5 m. 5. Interbanks monetary market. In July of year 2006 there was observed a decrease of activity of banks on offering of liquid funds in national currency at the Interbanks monetary market, and an increase - in foreign currency. Compared to June of year 2006, volume of the offered Interbanks tenge deposits decreased by 46% to KZT672.0 bn. Weighted average coupon rate on the offered Interbanks tenge deposits, compared to June, grew unseeingly (from 3.77% to 3.98%). In July there were offered dollar deposits by 28% less, compared to June of the current year ($12.6 bn.) at the Interbanks market of currency borrowings. Weighted average coupon rate on offered dollar deposits in July of year 2006 decreased to 4.70% from 5.08% in June. Transactions in other types of Interbanks borrowings were made in small volumes. 6. Deposit market. The total volume of deposits of residents in the banking system in June 2006, compared to May 2006, increased by 7.1% (since the beginning of the current year by 30.3%) to KZT2154.1 bn. Deposits of juridical entities increased by 8.2% to KZT1414.0 bn., deposits of physical persons - by 5.2% to KZT740.0 bn. In June of year 2006 deposits in national currency grew by 8.8% to KZT1423.3 bn., deposits in foreign currency - by 4% to KZT730.8 bn. As a result, the weight of deposits in tenge augmented from 65% to 66.1%. Savings of the population (taking into account the non-residents) in banks within the month increased by 5.3% to KZT749.4 bn. In June of 2006 there were an increase of tenge deposits in the structure of the population's savings by 9.8% to 499.2 bn., and a cut of deposits in foreign currency by 2.6% to KZT250.2 bn. As a consequence, the weight of tenge deposits increased from 63.9% to 66.6%. Dynamics of rates of banks' deposits was characterized as follows. In June of 2006 the weighted average coupon rate on tenge date-fixed deposits on non- banks juridical entities totaled 3.8% (in May of 2006 - 4.1%), and on deposits of physical persons - 9.4% (9.9%). 7. Credit market. The total volume of the main debt on banks' credits in economical system within June of year 2006, compared to May of year 2006, increased by 4.5% (since the beginning of the current year by 20.2%) to KZT3116.2 bn. It is observed the anticipatory rate of the credits growth in national currency, compared to credits in foreign currency. Credits in national currency within the month augmented by 6% to KZT1608.1 bn., and credits in foreign currency - by 2.9% to KZT1508.0 bn. As a result, the weight of tenge credits, compared to May of year 2006, grew from 50.9% to 51.6%. Also was there observed the forward rate of the long-term credits, compared to the short-term credits. Long-term credits grew by 5% to KZT2241.0 bn., and short-term credits - by 3.1% to KZT875.2 bn. As a consequence, the weight of long-term credits augmented by 71.5% to 71.9%. Credits for juridical entities increased by 2.9% to KZT2180.7 bn., and credits for physical entities - by 8.4% to KZT935.5 bn. As a result, the weight of crdits for physical persons grew from 28.9% to 30%. The coupon rates in June had diverse dynamics. Within June, compared to May of year 2006, the weighted average coupon rate on credits in national currency for physical persons increased from 19.0% to 19.8%, and on credits for juridical entities from 13.5% to 13.4%. 8. About the meeting of Council for economical policy. On August 12, 2006 the out meeting of Council for economical policy took place in Almaty, to which representatives of financial organizations and Association of financiers of Kazakhstan were invited. There was discussed in the course of the meeting the policy of the exchange tenge rate, Concept of the development of the financial sector, and also the question on introducing shares of the several state companies to the exchange market. Concerning the question, connected with policy of exchange tenge rate, there was noted that, in all, there appeared the tendency of tenge against dollar strengthening at the domestic currency market in the current year, despite some tenge devaluation last time. The state of affairs at the domestic currency market is determined by permanent inflow of the meaningful volumes of currency income, provided by the high rate of word prices for energy resources, big volumes of transactions in currency segment of exchange and Interbanks markets, which create the necessary prerequisites for exceeding of the foreign currency offering over the demand. The measures of Government, The National Bank, Agency of Republic of Kazakhstan for regulation and supervision of financial market and financial organizations were discussed during the meeting, which can influence on the further dynamics of the exchange tenge rate. There was among them the new scheme of formation of the National fund, changes in the mechanism of minimal reserve requirements and in the order of fixation of limits of banks' currency position, liberalization of currency model. There was taken a decision to carry on the policy regarding the exchange rate, that is, the conservation of the floating model of the exchange rate under the existent conditions. The project on development of the financial sector of Republic of Kazakhstan gave rise to more active discussion, basing on which there were accomplished several suggestions by Ministry of economy and budget planning. It reflects the questions of the further policy of The National Bank, development of the payment systems, enlargement of regional financial center Almaty city, institutional progress of participants of the financial market (the banking sector, insurance sector, the accumulative pension system, the securities market), functioning of the development institutes, and also the question of integration of the financial systems within frameworks of regional cooperation. Resulting the discussion, the participants of the meeting arrived at conclusion that the project of the Concept requires for precise examination taking into account correction of the specified there tasks and purposes, and also several real suggestions of interested state bodies and Association of financiers of Kazakhstan, second tier banks, insurance companies, accumulative pension funds, professional participants of the securities market were pronounced there. There were considered two companies in respect of introducing their shares to the market: NC Kazakhstan temir zholy JSC and Kazakhtelecom JSC. Concerning the question of NC Kazakhstan temir zholy JSC, it was noted that introducing its shares at the present stage to the market does not seem to be possible due to several legal, economical and technological problems, solution of which requires the time. However, the possibility appeared for arranging the work in order to present the shares of its daughter companies. Potential issuers of securities, in the view of borrowing, are the shareholders companies Kazzheldortrans and Lokomotiv. At the same time the necessity appeared to conduct preparatory works, including in respect to Kazzheldortrans JSC, concerning the questions of assignment of the status to the company (domestic or national transporter), and also detailed specification of the questions, relative to determination of the method of shares offering, determination of the targeted markets of offering and so on. There was presented information in terms of Kazakhtelecom JSC, concerning stages of its shares selling. It is planned to offer 5% sahres exceptionally at the domestic market at the first stage. At that, the stake of the state in the person of Holding Samruk JSC will make 50% +1 out of the voting shares that will allow the company to keep the control holding over Kazakhtelecom JSC. 9. About measures targeted at toughening the monetary-credit policy. Within the frameworks of measures, targeted at toughening the monetary- credit policy, The National Bank since August 18, 2006 will increase volumes of short-term notes' offering up to KZT150 bn. at each auction. Quotation end [2006-08-16]