The market of corporate bonds will not shrink in Kazakhstan - NSC

/IRBIS, Jan 25, 01/ - REUTERS informs, with the reference to the head of the National Securities Commission of Kazakhstan (NSC), Azamat Djoldasbekov, that the market of corporate bonds, launched by the NSC of Kazakhstan in 2000, will show the same volumes as it did last year, though the growth is also expected if insurance companies and foreign investors will appear on the market. These two groups will create additional demand and the offer of bonds will increase correspondingly, he added. The NSC informs that the volume of bond issues by the corporations and municipal bodies equaled $170 mln last year, with the most of them being mid-term coupon bonds issued by big companies such as Kazakhoil, Kazakhstan Temir Joly, KazTransOil, some big and medium banks and small production companies. Meanwhile, government bonds issues exceeded $400 mln in 2000, is said. The head of the NSC believes that foreign investors can appear in Kazakhstan only if the parliament adopts new tax law, and the insurance companies will get active under the regulation of the National Bank. He also said that yields of the bonds are too low and therefore it prevents foreign investors from coming here. The yields of the latest corporate bonds are said to vary between 10-14% APR. It is excessive liquidity of the banks and the pension funds that cause the yields to go down, which distracts foreign investors from our market, as well as unfavorable tax law, is said. He believes that foreign portfolio investors can balance the dominant pension assets management companies (PAMC), and stimulate the development of the stock market, though their participation should be limited "to some degree" in order to keep the balance. Last year the bond issues were booming, while the number of professional market participants was decreasing, he mentioned. All brokers changed their qualifications from simple speculations and buying to offering financial consultations, hence, about 80% of all bond issues were organized by the brokers and the dealers, is said. The next step, as he said, was to make everyone to get used to the fact that the issuers should not issue the securities if they don't have a legal advisor, since it is a wide spread practice in the world. Nobody will buy the issuer's securities unless there is a financial and legal advisor, auditor, professional accountant beside him, he added. The head of the NSC said that "negative" experience of the bonds market in 2000 was because of unconscientious issuers, though he did not mentioned any. There is a great risk, which is not to allow the swindlers and adventurers to get into the market as the issuers and therefore, the Kazakhstan Stock Exchange is making its listing requirements more strict, and the NSC has adopted special resolution on limiting the access to "A" listing for some categories of the issuers, Mr.Djoldasbekov said. It is said that in order to pass "A" listing of the Exchange the issuer should prove its financial stability. The main condition is the existing stable cash flows that allow the company to meet its bond obligations irrespective of the project results, was added. From January 2001 the NSC is said to have allowed the issuers, whose bonds have not been repaid yet, to conduct another issue. However, even in this case the issuer should meet several requirements like he should have a certain rating, had not been defaulted on previous issues, maintain a certain ratio between his borrowed funds and equity based on the NSC figures. Another issue is allowed for mortgage bonds as well, is said.