EXPERT INTERVIEW: Experts estimate capacity of Kazakhstan primary share market at $2-4 bn.

/IRBIS, Ruslan Dzubaylo, August 6, 2008/ - There is an opinion that it is impossible to borrow big sums during initial public offering (IPO) on Kazakhstan Stock market. Opinions of interviewed experts by IAFM IRBIS on this question on July 1 - 5 are divided. Yuriy Khramtsov, economist of VISOR Capital JSC considers that stable and healthy companies may borrow considerable sums through initial shares offering. "IPO of Exploration Production KazMunaiGaz JSC, passed in October 2006, may become Benchmark of such borrowings" - expert confirmed. At that, according to Mr. Khramtsov, big investments volumes may come from APF, for which, investments in shares, denominated in tenge, exclude conversion risks. Yuliya Feller, the head of financial examination and consulting office of Investment Banking Department of RESMI Finance & Investment House JSC has the same viewpoint. According to Y. Feller, investor base in Kazakhstan will expand at the expense of investments increasing on the side of different investment funds. "There are rather advanced companies in Kazakhstan, which can enter the stock market and be the interesting objects for investment" - Mrs. Feller said, giving government plans on leading "blue tokens" on stock market, which are in Holding Samruk JSC as an example. Mrs. Feller in its turn, has more pessimistic forecasts: "It is hard to estimate the capacity of primary market of equity instruments in Kazakhstan, but we can speak about $1 - 1.3 bn.". Vitaliy Kan, analyst of external analysis managing and forecasting of BTA Bank JSC also against that its impossible to borrow big capitals during IPO ion Kazakhstan Stock market. "If we make expert Road Show, major attractive companies will manage to borrow $1.5 - 2 bn. on Kazakhstan Stock Floor". What comes to capacity of internal primary market, above-mentioned experts gave different figures. "As assets of pension funds will grow with 1.5 - 2.5 % speed a month, it means that pension funds will have to invest $2 - 4 bn. in stable instruments" - economist of VISOR Capital JSC, Yuriy Khramtsov considers. According to him, Kazakhstan companies may also count on the part of assets of physical and legal entities, which are on the accounts of second tier banks (total $36 bn.). Vladimir Gerasimenko, the director of corporate finance of Asia Broker Services JSC in its turn thinks that initial public offering of second tier banks is problematic, as in Kazakhstan there is still investors class, taking considerable risks. "Pension funds, the main investors on the market, are only the class of long-term and rather conservative investors. Thus, we can't guarantee demand during IPO" - Mr. Gerasimenko considers. According to him, absence of internal financial analysts institute in Kazakhstan is an important factor. Niyaz Ayubaev, expert of Subsidiary organization of joint stock company BTA Bank BTA Securities JSC is partially disagree with opinion of above- mentioned analysts. According to his accounts, potential capacity of Kazakhstan primary market makes $3 bn. (based on current statistic data and supposition that theoretic stake of shares in portfolio of institutional investors may be expanded twice). Expert affirms that this volume can provide demand during initial public offering of only several mid issuers. However, this potential of domestic market, according to Ayubaev, is narrowing at the expense of (1) the range of normative restrictions for APF and (2) conservative strategy, followed by APF and other financial institutes. "It is clear that guarantee of successful shares offering is well-known name of issuing investment bank, presence of wide investors base [...], and also good organized activity of shares issue and offering process...", - Niyaz Ayubaev said. According to him, at the current moment, infrastructure of Kazakhstan market not corresponds to these demands in the rate, comparable with foreign floors. Information is presented within the frames of weekly expert interview on acute questions of Kazakhstan and international stock market development, made by IAFM IRBIS. Analysts of Asia Broker Service JSC, VISOR Capital JSC, RESMI Finance & Investment House JSC, Subsidiary organization of joint stock company BTA Bank BTA Securities JSC and BTA Bank JSC participated in interview. IAFM IRBIS expresses its gratitude for participation in this project. For detailed information please contact us Tel.: (727) 237 53 41 [2008-08-06]