ANALYSIS: In February 2006 GS market on KASE had significantly liven up on the background of prevailing supply of bonds

/IRBIS, Ruslan Dzubaylo, Andrey Tsalyuk, March 12, 07/ - In February 2006 on Kazakhstan stock exchange (KASE) 144 deals were registered in government securities (GS) purchase and sale sector for the total of KZT85,611.0 m. (equivalent of $688.6 m.), which was 3.1% out of the total exchange turnover of the month (in January - 1.6%). Relative to January 2007 the sector's turnover increased 1.9 times in tenge and in dollar terms, relative to February - 3.0 times in tenge expression and 3.1 in dollar equivalent. In the primary market sector on February 14 the Ministry of finance conducted on KASE the auction on offering of MEOKAM-48 KZK2KY040352 (MOM048_0035; KZT1,000, February 14, 07 - February 14, 11, fixed annual coupon, 30/360), at which it planned to offer bonds for a total of KZT16,500.0 m. The subject of trades at the auction was the coupon rate. Demand had reached 333% out of the announced volume of offering. The traded rate (which at the given offering was equal to yield of bonds to maturity for buyer) in limited and active orders as of moment of expiry of application terms varied from 6.25% APR to 8.50% APR and in average weighted expression totaled 7.5981% APR. In total volume of of active bids to the stake of subjects of pension market came 14.1%, of Kazakhstan banks - 84.4%, their clients - 0.6%, clients of broker-dealer companies - 0.9%. By the totals of trades the coupon was determined in size of 6.25% APR and Ministry of finance by the four deals had borrowed to the budget KZT227.8 m. (1.68% from the planned volume of offering), having sold 277,777 bonds with term before maturity 1,440 days. By results of specialized trades all bonds were redeemed by Kazakhstan banks. Totals of the offering yet did not confirmed the intentions of Ministry of finance to increase the yield of offering liabilities. Such intention was announced in January by Natalya Korzhova. It is not excluded that the enough rough in price relation demand on the auction, including from the side of pension funds, was conditioned by corresponding expectations of the market. However these expectations were not realized. In the secondary market sector, the volume of operations increased suddenly relative to January. Statistical indicators of this sector are given in the table (in parentheses - comparative indicators of the previous month). ------------------------------------------------------------------------------ Yield to maturity for the buyer, %APR Term ------------------------------- Volume, m. KZT Number till maturity min max last WA at market price of deals -------------- ----- ----- ---- ----------- ------------------- -------- Discounted GS (KZT): National Bank's notes - 76.6% (76.4%) of the market ------------------------------------------------------------------------------ less 8 1.50 4.65 3.30 2.96 (4.05) 30,351.6 23 8 - 14 3.50 6.09 3.50 4.29 (4.15) 20,297.5 17 15 - 28 3.80 5.08 5.08 4.54 (4.72) 14,697.2 20 -------------- ----- ----- ---- ----------- ------------------- -------- Total 65,346.3 (23,807.8) 60 (35) -------------- ----- ----- ---- ----------- ------------------- -------- Coupon GS (KZT): MEOKAM, MEUKAM - 23.4% (23.6%) of the market ------------------------------------------------------------------------------ less than 730 5.39 8.47 6.10 5.87 (6.02) 11,288.9 43 731 - 1095 5.99 10.16 6.05 7.07 (6.09) 6,544.0 23 1096 - 1460 6.16 6.45 6.25 6.25 (5.79) 1,229.0 6 1461 - 1825 5.50 6.75 5.50 5.72 (5.58) 550.2 3 more than 2191 5.50 5.50 5.50 5.50 (5.50) 365.6 3 -------------- ----- ----- ---- ----------- ------------------- -------- Total 19,977.6 (7,355.3) 78 (56) -------------- ----- ----- ---- ----------- ------------------- -------- Coupon GS (USD): bonds of Astana city - 0.002% (0.03%) of the market ------------------------------------------------------------------------------ less than 730 5.80 5.80 5.80 5.80 (6.25) 1.5 1 -------------- ----- ----- ---- ----------- ------------------- -------- Total 1.5 (8.7) 1 (6) -------------- ----- ----- ---- ----------- ------------------- -------- Euronotes of Kazakhstan - 0.01% ( 0.01%) of the market ------------------------------------------------------------------------------ less 730 5.40 5.40 5.40 5.40 (6.40) 7.8 1 Total 7.8 (2.7) 1 (1) -------------- ----- ----- ---- ----------- ------------------- -------- GRANDTOTAL 85,333.2 (31,174.6) 140 (98) ------------------------------------------------------------------------------ Form the data given in the table, it comes that the secondary exchange market had liven up in the two main segments - while trades in notes of National bank and MEKAM. Results of the conducted analysis let the analysts of IRBIS to suppose that activization of notes on the market was caused mainly by increased demand for these instruments form the side of one of large banks. On its stake it came 50% of notes redeeming. In conditions of lower short-term tenge liquidity in February (compared to January) this demand had found the adequate supply, because notes were buying according to yield, significantly abating to corresponding indicator of primary market (4.71% APR for 28 days). Secondary market of MEOKAM and MEUKAM was developing in conditions of abundant bonds offering, which led to growth of their profitability for buyers, which were mostly second tire banks. In all, it is noteworthy that GS market 2007 notably tends to growth of liabilities' profitability. It is not excluded that these moods are caused by promises of the Ministry of finance to compromise on the market concerning profitability, and also intention of the National bank to launch issue of longer (correspondingly, more profitable) notes since March 1 made for that. It is necessary to take into account that in February repo 'overnight' rates in average expression grew over two times. The market met bigger need to get tenge, compared to January. In opinion of IRBIS specialists, it formed the GS offering controlling the demand on the exchange floor. The stake of exchange turnover in total volume of purchase and sale deals on Kazakhstan GS secondary market in February grew to 25.6% (in January it totaled 15.8%). IRBIS analysts expect to observe in March rather active GS secondary market, which is caused by brining to the market new longer notes and predicted growth of volume of MEKAM offerings. [2007-03-12]