EXPERT INTERVIEW: KASE index falling is on global tendencies

/IRBIS, Vitaliy Tomskiy, August 28, 2008/ - KASE index since the beginning of current year fell by 22.7 % (since August beginning - by 13.2 %), the regular annual minimum was reached on August 26 at 2 037.90 point. According to analysts, participated in interview, prepared by IAFM IRBIS, the major factors of such continuing falling are negative tendencies on world stock markets and in global economy in the whole. Experts agree on the question that this process is rather objective and regular, pointing considerable rate of integration of domestic stock market and economy of the country in global processes. Thus, Sapar Baymahanov, financial analyst of Tengri Finance JSC notes: "Kazakhstan as the country with open market developing economy is highly integrated in global economy processes; that's why reaction of Kazakhstan market on foreign events is rather regular and objective, including pricing of Kazakhstan assets. Maulen Usenov, analyst of BCC Invest JSC - Subsidiary of Bank CeterCredit JSC makes comparisons with shares offering of domestic companies on world stock markets. "Domestic stock market through the mechanism of depositary receipts became the part of global financial space. Presence of Kazakhstan companies through depositary receipts on London Stock Exchange turned the shares of the last to rather liquidity instrument, "adding" to it a wide circle of investors. Investment funds, funds of direct investments and other professional investors, oriented for country development, use depositary receipts of domestic companies with the purpose of both branch and country diversification. These participants regularly conduct assets allocation, considering news of the countries, where they operate and external news, so participants try to react to possible cycle decreases, crisis e. t. c. Vitaliy Kan, expert of BTA Analytics focuses at specific weight of shares of Kazakhstan issuers, included in KASE index representative list and simultaneously circulating in the form of GDR on London Stock Exchange, which made 58.2 % of all structure of KASE index. "Mainly all this explain degree of response level of KASE index to the moods of foreign investors. Whether we like it or not, but with Kazakhstan companies entering foreign stock floors, the rate of influence of international investors on rate dynamic of Kazakhstan shares, circulating on London Stock Exchange increased. Today fundamental factors are not so important that means now external news plays the significant part in determination of further share rate dynamic. Besides, foreign investors refer Kazakhstan stock market to emerging markets and lately international investors` attitude toward developing markets is not so good. We mean attitude of the last toward the market in the whole, but not toward investments in separate shares of separate issuers. Thus, there still will be no considerable improvement in world financial system and as far as risks of decreasing demand on primary goods will be retained on global economy recession, pressure on quotations of not only Kazakhstan issuers but global share market will be retained" - the expert notes. Nurlan Rakhimbaev, the head of branch analytics department of Subsidiary organization of Joint Stock Company BTA Bank BTA Securities JSC also sees the reasons of domestic index share fall in global processes, but also notes negative internal background. "Bear" moods of investors on local market - is a regular reaction to tendencies on global and internal markets. Retained tension in world financial sector and domestic banking sector determine negative investors` attitude to bank's shares. The same situation is observed in primary sector. Shares of Kazakhmys, ENRC and EP KazMunaiGaz fall in response to oil and metal price decreasing, aroused by world economy recession threat. Besides, Government plans on increasing its tax load made negative influence on shares of primary sector. Azamat Eskozha, financial analyst of Investment and Finance Management Department of RESMI FIH JSC shares the opinion of the experts. Analyst says that in case of negative events, first victims and accelerators of decline on Kazakhstan market will be securities, having informational (adjudicatory) bridge with liquidity foreign markets, that means having listing on foreign floors. According to expert, the reasons of investors` escape can be both reviewing of risks, limits restriction on companies of developing countries, capital transferring to more secure and perspective markets and irrational factors, when investors blindly sale shares. An analyst supports its version by the statistics of Central Depositary on volume of securities in nominal holding on the accounts of nonresidents, which during recent months characterized by strong instability. "If in April and May 2008 volumes grew by 7 % for a month, in June and July volume fell by 5 % and 18 % correspondently. Decreasing of volumes means that nonresidents leave the market and can interfere the situation, because still have 11 % of total volume". At the same time, expert sees the fundamental reasons of falling of internal market of equity instruments. "We should admit that there is cause and effects of our market declining because of its financial component. Our banks, as well as all financial institutes, are directly exposed by recession risks because of worsening credit situation in the world. Still uncertain condition of credit portfolios of our banks doesn't give confident to investors". At the same time, Shakhnazar Tleuliev, analyst of Asia Broker Services JSC considers that there is no fundamental reasons foe such significant KASE index decreasing. "The markets were always led by speculations and that's why we think that there are no fundamental reasons for KASE to renew historical minimums every day. Our "blue chips" show good results: banks regularly, according to schedule mature debt and companies of actual sector also conduct active expansion policy. For example, results of EP KazMunaiGaz JSC for the first quarter were very good and if we follow logic may suppose that share of this issuer won't show high volatility and sharp falls. Bu they fall because of negative Western news". The expert gives the reasons of falling: incompetence of foreign investors. "The major reason is that western investors, owing depositary receipts of domestic issuers, don't know the current situation on the market. For example, there was speculation that Lehman Brothers will soon writ-off the big sum for irreparable debts and at once shares of financial companies fall, even if some of them are very stable". 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, BCC Invest - Subsidiary of Bank CenterCredit JSC, Asia Broker Services 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 [2008-08-28]