ANALYSIS: KASE index is falling under outside pressure

/IRBIS, Vitaliy Tomskiy, Ruslan Dzubaylo, October 1, 2008/ - September 30 KASE index renewed its minimal value for the last 52 weeks - 1,426.19 point, overcoming psychologically main point of last 30 days in 1, 500 points. Since the beginning of September index decreasing is estimated in 570.11 points or by 28.6 %, since the beginning of current year - by 45.9 %. Falling relative to maximum in 2008 on closing day (2,858 point on 21.02.08) reached 1 431.8 points or 50.1 %. From the viewpoint of technical analysis, Kazakhstan shares market is in evident "bear" phase of its development. Below the Information Agency of Financial Markets IRBIS (Almaty) publishes its opinion on Kazakhstan share market situation. In September, negative tendencies on the stock market continued. At that the major event was bankruptcy of largest investment bank Lehman Brothers. The bank with 158 years history was shutdown on mortgage assets problems. On Monday, September 15 this fact aroused the regular wave of shares sale of financial sector companies from Asia to America. The markets were opened with share equity fall and during further two days reached 70 %. It resulted in extensive overestimation of shares on repo market, what may result in non-payment crisis. The major example - is Russian stock market, which on Tuesday was lack of liquidity. First two mid-level banks (investment Kit Finance and bank Soyuz) were endangered. Sharply raised liquidity on the monetary market was worsened by investors` panic. On this background Central banks began the program of scale interventions to avoid so called domino effect. However, several European banks fell under liquidity crisis, what is the sign of negative event expanding. Thus, last Saturday two major financial institutions was known to be nationalized - Belgium Fortis and Britain mortgage bank Bradford & Bingley. For not to admit deterioration of crisis situation and collapse of the whole financial system of the USA, the Minister of Finance Henry Paulson offered the bailout plan. According to it, the fund for redemption of "bad" bank assets was supposed to create. The volume of the fund should make $700 bn., withdrawn from the budget. At that, investment banks arranged the range of preventive measures. In particular, two major investment banks - Morgan Stanley and Goldman Sachs announced on changing their status on "banking holding", starting reorganization from investment in commerce banks. Such status means tough management and supervision on the side of the government and opportunity to get more expanded government support in case of problems. As a result, rash falling of the world indexes was changed by not rasher growth. In Kazakhstan it led to stabilization of KASE index on last week at 1.600 points. Unfortunately, Paulson's plan was rejected by the USA Senate on Monday. Investors` reaction came immediately. Discouraged by inability of USA authorities to "sell" parliamentarians elaborated plan, they started the second wave of mass sales, which took $1 trl. American stock market, according to experts. Table 1. World index dynamic (in %) ------------------------------------------------------- Index 30.09.08 1 day 1 month 2 months ------------------- -------- ----- ------- -------- NASDAQ 2,082.33 +5.0 -12.0 -10.5 ------------------- -------- ----- ------- -------- S&P 500 1,164.74 +5.3 -9.2 -8.1 ------------------- -------- ----- ------- -------- Dow Jones Composite 3,829.04 +3.3 -8.0 -7.5 ------------------- -------- ----- ------- -------- DAX 5,831.02 +0.4 -8.9 -9.3 FTSE 100 4,902.50 +1.7 -13.0 -9.4 ------------------- -------- ----- ------- -------- РТС Index 1,211.84 +1.5 -26.4 -38.4 ------------------- -------- ----- ------- -------- ММВБ Index 1,027.66 +0.8 -23.8 -31.3 ------------------- -------- ----- ------- -------- KASE Index 1,426.19 -5.6 -28.6 -38.9 ------------------------------------------------------- As we see domestic market of equity instruments in Kazakhstan, possessing no competitive investor base, cant to resist "escape in quality" and panic, covered investors from Tokyo to San-Francisco. Depending on moods of London City, it continued reacting at all outside changes. Table 2. Price dynamic of Kazakhstan companies` equity instruments, having listing on KASE and LSE since September 1 - 30 2008 (in %) ------------------------------------------------------------------ Ticker Issuer KASE/LSE KASE LSE ------------------------------------ ------------ ------ ------ Halyk Savings Bank of Kazakhstan JSC HSBK/HSBK -34.43 -32.60 ------------------------------------ ------------ ------ ------ Kazkommertsbank JSC KKGB/KKB -25.04 -27.45 ------------------------------------ ------------ ------ ------ Alliance Bank JSC ASBN/ALLB -20.99 -41.94 ------------------------------------ ------------ ------ ------ KAZAKHMYS PLC GB_KZMS/KAZ -46.04 -52.34 ------------------------------------ ------------ ------ ------ EP KazMunaiGaz JSC RDGZ/KMG -30.98 -31.72 ------------------------------------ ------------ ------ ------ ENRC PLC* GB_ENRC/ENRC -52.73 -47.94 ------------------------------------------------------------------ * ENRC PLC - abbr. Eurasian Natural Resources Corporation PLC (shares of ENRC PLC and Alliance Bank JSC are not included in KASE index representative list) It should be admitted that influence of fundamental reasons, among which the major is financial status of issuers of securities, on "blue chips" quotations of Kazakhstan in described period was minimal. Market conjuncture was determined by exogenous factors. IRBIS agency gives notice that the material given above is not an offer or recommendation to sell or buy shares on KASE. Any one using the material while taking investment decisions does not make IRBIS agency responsible for possible losses, resulting from such decisions. [2008-10-01]