/KASE, August 23, 11/ - As was previously informed, from August 23, 2011,
Kazakhstan Stock Exchange (KASE) puts into effect its revised internal document
"Methodology of Securities Valuation" (The Methodology).
Below is description of principles of valuation of financial instruments by main
categories implemented in the new Methodology, as well as comparison with the
valuation procedure previously in force.
1. Corporate bonds are valued at the price of the best ask quotations (and not
at the yield of those quotations, as it was the case before), whereas:
- bonds traded in "net" prices, are valued daily ("net" price determined based
on the best ask prices once a week, plus the interest accrued as on the
date of valuation);
- bonds traded in "dirty" prices are valued once a week based on the best ask
quotations.
2. Procedure of shares valuation is not changed, whereas:
- liquid shares are valued based on prices of the last five deals;
- non-liquid shares are valued based on prices of purchase orders during the
last five days.
Liquid shares are shares present as of the date of valuation in the list of
liquid shares drawn up by the Exchange in accordance with the Methodology
of Securities Liquidity Indicators Defining and published at
http://www.kase.kz/ru/normative_base
3. Non-indexed government securities (GS) are valued at yield-to-maturity,
whose values are defined in limits of groups pointed out by the Expert
Committee of the Exchange's Board of Directors by way of interpolation on
equations derived by using the method of approximation of parameters of
deals (dates before repayment and yield) with non-indexed GS for 60 calendar
days preceding the evaluation date. For building the mentioned yield curve
polynomial trend equations of various degrees are used.
Previously valuation of such GS with maturities of less than 1,460 days was
conducted based on yields obtained by way of interpolation on the logarithmic
trend equation, and valuation of GS with maturities of more than 1,460 days was
conducted based on yields calculated as an arithmetic average of yields on all
deals which were concluded in the Exchange's trading system during the last
three auctions for placement or additional placement of GS relatively to the
valuation date.
4. Inflation rate-indexed GS are valued based on the forecasted (at the
inflation rate) yield to maturity. Previously, such GS were not united in one
group and were valued depending upon the number of days left to their
maturity:
- more than 720 days left to maturity - based on the forecasted (at the
inflation rate) yield to maturity;
- les than 720 days left to maturity - by way of building the logarithmic trend
equation from yield values on deals.
5. MAOKAM are now valued based on yield values on deals for the last 15
successful days, preceding the valuation date (in the absence of a sufficient
number of successful days - at the current coupon on the security). Earlier,
the procedure of MAOKAM valuation was not regulated, and they were valued
based on a decision of KASE's Risk Committee as non-indexed GS.
6. The procedure of valuation of municipal GS has been changed (previously
these securities were valued at the yield of the best ask quotations);
however it remained similar to the procedure of valuation of corporate bonds
(see above).
7. The procedure of valuation of foreign government (FGS) securities and
securities of international financial institutions (IFIS) has been determined
similar to the procedure of valuation of corporate bonds issued according to
the legislation of foreign states. Previously there was not any procedure of
valuation of foreign GS and securities of IFIs.
In addition to the mentioned above, the new Methodology features a new approach
to defining the size of discounts of market prices of debt securities for the
purpose of their use as underlying assets of nego repo transactions (the size of
discount of shares' market prices remains unchanged - 30%):
- discount for non-government bonds will be fixed depending on their rating, or
in the absence of such, on the disposition of the corporate bond in KASE list;
the size of discount may vary from 10 to 30 % of the market price (previously,
prices of all corporate bonds were discounted at 20 % and did not depend on
the quality of security);
- market prices of international securities of the Republic of Kazakhstan are
discounted at 5 %;
- market prices of tenge-denominated GS of the Republic of Kazakhstan with a
fixed coupon rate and tenge-denominated discount GS of the Republic of
Kazakhstan with time left from the valuation date to maturity not exceeding
360 days - at 5 % (previously - 5% for the National Bank's notes, 10% - for
GS with maturity of up to 1,460 days issued by the Ministry of Finance);
- market prices of tenge-denominated GS of the Republic of Kazakhstan with a
fixed coupon rate and tenge-denominated discount GS of the Republic of
Kazakhstan with time left from the valuation date to maturity exceeding 360
days - at 10 % (previously - 10% for GS of the Ministry of Finance with
maturity of up to 1,460 days, 15% - for maturity of over 1,460 days);
- market prices of foreign currency-denominated GS of the Republic of Kazakhstan
and tenge-denominated GS of the Republic of Kazakhstan indexed at the rate of
change of the exchange rate between tenge and some foreign currency with time
left from the valuation date to maturity not exceeding 360 days - at 10 %
(previously there was no discounting system);
- market prices of foreign currency-denominated GS of the Republic of Kazakhstan
and tenge-denominated GS of the Republic of Kazakhstan indexed at the rate of
change of the exchange rate between tenge and some foreign currency with time
left from the valuation date to maturity exceeding 360 days - at 15 %
(previously there was no discounting system);
- market prices of tenge-denominated GS of the Republic of Kazakhstan with an
inflation rate-indexed coupon rate and time left from the valuation date to
maturity not exceeding 360 days - at 10 % (previously 10% - for GS of the
Ministry of Finance with maturity of up to 720 days, 15% - for maturity of
over 720 days);
- market prices of tenge-denominated GS of the Republic of Kazakhstan with an
inflation rate-indexed coupon rate and time left from the valuation date to
maturity exceeding 360 days - at 15 % (previously 10% - for GS of the Ministry
of Finance with maturity of up to 720 days, 15% - for maturity of over 720
days);
- market prices of IFI securities - at 10 % (previously there was no discounting
system);
- for foreign GS the size of discount is fixed similar to corporate bonds (see
above, previously there was no discounting system).
The revised text of the Methodology is available on KASE website, at
http://www.kase.kz/files/normative_base/met_ocen_zb_eng.pdf
[2011-08-23]