EXPERT INTERVIEW: Low component of KASE index affects its demand by the market and adequacy of the current situation

/IRBIS, Vitaliy Tomskiy, August 20, 2008/ - On the current week IAFM IRBIS interviewed professional participants of stock market on demand and adequacy of Kazakhstan KASE share index and its practical role on the stock market. On the whole, opinions of interviewed experts on this question were differed, insignificantly and coincided on weak component filling of share index owing to the total low liquidity of Kazakhstan stock market. Azamat Eskozha, financial analyst of RESMI FIH JSC notes that 10- component index corresponds the narrow internal market and in total correctly reflects its dynamic. "In the current condition as the major indicator of the market, index satisfies us, in any case there is nothing to choose from - we just haven't such active securities to collect KASE100" - the expert says. "On the other hand, for instrumental ones, index (KASE index) is very small and doesn't reflect acute diversification for investor, who wants to invest in Kazakhstan market, moreover, according to industrial feature, index is excessively homogeneous and exposed by specific risks". Baurzhan Tulepov, director of risk management and analysis department of Tengri Finance JSC thinks the same. "At the current moment the evident problem of KASE index is its high volatility, what is explained by little amount of instruments. Along with this, index covers not all securities, circulating on the market, what distances it from theory of "market portfolio", according to which, the market consist of all possible instruments. Though it is explained by weak liquidity on Kazakhstan securities market, it interferes with using index in practical aims". At the same time, expert considers that in future practical value of KASE index will grow. "In some cases even index is not so important, but its long history. In analytic aims index is necessary for measuring investments` market yield, market risks of separate securities, market's dividend yield and total coefficient of capital` reinvestment". Nurlan Rakhimbaev, the head of branch analytics department of Subsidiary organization of Joint Stock Company BTA Bank BTA Securities JSC says more critical about KASE index. Expert thinks that KASE index will hardly to count on instrumental role, due to its low demand and inadequacy. "Index reflects market's low liquidity, unpredictability of players and high stake of nonmarket deals, what makes it inadequate relative to foreign markets and correspondently hardly predictable". Analyst notes: "The set of liquid issuers` shares is poor and mostly is presented by banking sector. The stake of other spheres, forming economy of the country is low. In the index there are only one metallurgy and one oil and gas company, though the amount of Kazakhstan companies of this sphere, which equity instruments are presented on foreign markets, outnumbered 10 figure. That's why currently there is a range of alternative indexes from the number of foreign investment banks, which are more liquidity and precisely reflect the structure and dynamic of Kazakhstan market of equity instruments". Vitaliy Kan, expert of BTA analysis at the same time says that currently KASE index is rather demanded and adequate to the current situation on internal equity market. "Index fully reflects situation on Kazakhstan stock market, as in its representative list the most liquidity shares of Kazakhstan issuers are in (Kazakhstan Stock Exchange KASE)". According to expert, branch structure of KASE index representative list is close to structure of Kazakhstan economy, what tell about representation of this indicator. "KASE index has all chances to become the start point for creating index funds and derivatives market in Kazakhstan". REFERENS KASE index is official index of internal market of equity instruments, traded on Kazakhstan Stock Exchange. Index reflects changes of share value, included in it representative list, considering the level of capitalization of their issuers and shares` stake in free float. KASE index is calculated in real-time mode (after each deal conclusion) on prices of market deals. As of August 20, 2008 securities of 10 denominations and 8 issuers are included in representative list of KASE index: common and preferred shares of Kazkommertsbank JSC, common shares of BTA Bank JSC, Bank CenterCredit JSC, Halyk Savings Bank of Kazakhstan JSC and Temirbank JSC; common and preferred shares of Kazakhtelecom JSC, common shares of Exploration Production KazMunaiGaz JSC and Kazakhmys Plc. 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 Tengri Finance JSC, BTA Bank JSC, RESMI Finance & Investment House JSC, Subsidiary organization of joint stock company BTA Bank BTA Securities 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 [2008-08-20]