ANALYSIS: In March of 2006 foreign currency market on KASE demonstrated a record high activity

/IRBIS, Sergey Yakovlev, Andrey Tsalyuk, April 10, 06/ - In March of 2006 volume of foreign currency transactions made on Kazakhstan stock exchange (KASE) reached the equivalent of USD2,825.4 m. or KZT363,105.5 m. Relative to February of 2006 volume of deals grew by USD977.4 m. (KZT120,498.1 m.) or by 52.9% in terms of dollar and by 49.7% in terms of tenge. Relative to March of 2005 trade volume grew 3.6 times in terms of dollar and 3.5 times in terms of tenge. The stake of this sector in stock exchange's turnover grew from 18.9% in February to 34.1% in March of 2006. Volume of exchange's foreign currency transactions on KASE in March of 2006 is the record high monthly turnover for the whole history of exchange existence. The previous record was fixed in February of 2006. Total of 4,273 deals (3,435) were made in March of 2006 on KASE (here and further comparable figures of previous month are given in parentheses), including: in US dollars on TOD terms - 4,258 (3,164), on TOM terms - 2 (259), on SPOT terms - 10 (9); in euro - 0 (0), in Russian ruble - 3 (3). 99.99% of the whole volume of concluded deals in March of 2006 in total turnover of exchange's currency market fell to the stake of US dollar. In previous month the stake was 99.99%. On US dollars the volume of transactions on KASE in March of 2006 reached $2,825.4 m. (KZT363.1 m.). To compare, in February of 2006 this figure was $1,848.0 m. (KZT242.6 m.), in March of 2005 - $782.1 m. (KZT102,449.0 m.). In March of 2006 tenge strengthened against dollar. The speed of this process calculated at exchange's weighted average rate of the main session is estimated by the trend of 17.61% APR (Feb. 28, 06 = KZT130.35; Mar. 31, 06 = KZT128.40). In February of 2006 tenge was strengthening against dollar with the speed of 17.04% APR. Weighted average rate of U.S. dollar to tenge, calculated on deals of the main session in March of 2006 is KZT128.49 per unit, on all exchange's deals - 128.51. In February these indicators were KZT131.38 and KZT131.28 per dollar. In euro deals in March were not concluded on KASE. Although deals were made every day. On Russian ruble the volume of transactions on KASE in March of 2006 reached RUB1,200 th. for a total of KZT5.6 m. (in February transactions volume did not exceed RUB700 for a total of KZT3.3 m.). Judging by change of weighted average exchange rate (Feb. 28, 06 = 4.6280; Mar. 31, 06 = 4.6180), in the analyzed month tenge was strengthening against ruble with average speed of 2.54% APR. Conjuncture of US dollar market in March was very similar with February's one. The market was under a great pressure o dollar offer, and as the result country's head bank acted as the main buyer of them. During almost the whole month it provided a constant speed of tenge strengthening against dollar, because the market would be falling much more quickly without its influence. The major rate-forming factors of March are the considerable volume of exporters' currency proceeds coming to KASE, dollar selling by Kazakhstan banks on KASE, as well as well pronounced speculative component in traders behavior. In the opinion of IRBIS, the latter factor played almost the key role, and its effect was increased by foreign banks' participation on domestic market. Medet Sartbayev the deputy chairman of the National Bank said deposits of non-residents - including big foreign banks - in domestic banks started growing last year already. At the same time, Anvar Saidenov the chairman of the National Bank said volumes of non-residents transactions did not cause anxiety and were estimated at $500-700 m. Considering the fact that in the first quarter of this year average speed of tenge strengthening against dollar is estimated at 16.5%, foreign banks' actions on domestic market are quite understood. Even placing dollars converted into tenge on deposits in Kazakhstan, they get profit not only on deposit rate, but also on rate difference from short position. A more interesting, although less capacious, market at present is Kazakhstan's share market, where yield of some instruments reaches 200 - 1100% APR. For example, in March cost of common shares of CNPC - Aktobemunaygas JSC grew in weighted average expression by 95.4%, that corresponds to yield of 1,123.3% APR. Common shares of Kazkommertsbank JSC gave to their holder 1,042.3% APR, for their rate grew by 88.5%. Common shares of Bank CenterCredit JSC (CCBN) - 849.6% APR (+72.2%), Alliance Bank JSC (ASBN) - 659.4% APR (+56.0%), KAZZINC JSC (KZZN) - 392.4% APR (+33.3%), Bank TuranAlem JSC (BTAS) - 337.3% APR (+28.7%), Nurbank JSC (NRBN) - 215.6% APR (+18.3%), Halyk savings bank of Kazakhstan JSC (HSBK) - 209.1% APR (+17.8%). Change of KASE_Shares index in Marchi s estimated at 54.8%, growth rate is 645% APR. It's presumed that there is a considerable contribution of non-residents in the demand, which caused this phenomenon. In the last ten-day period of March the National Bank took strict measures on limiting speculative attractiveness of dollar on Kazakhstan market. Forming "firm" supports at KZT128 per dollar and higher, it achieved not only market's price stability and falling of USD offer volume, but also prices growth to 128.50. In order to sterilize excessive liquidity, it increased note issue, decided to increase refinancing rate, that let increase National Bank's rates on money borrowing. Dollar market in Kazakhstan is growing unwillingly. Actual market-makers from among second tier banks still prefer USD sale, that, possibly, was caused not so much by banks' tactics as by their clients orders. There is an opposition of the head bank and STBs on the market. And, in the opinion of IRBIS, it will result in market's going to a side trend. Borders of the forecasted subhorizontal consolidation channel are being determined now. But already now it's obvious that it's hardly probable that dollar will be traded lower than KZT128.00 in this year. In April analysts of IRBIS expect falling of dollar deals on KASE and prices fluctuations within KZT128.50 - 130.00 per dollar. [2006-04-10]