MAY 22 2017 (The Conway Bulletin) — Kazakhstan Central Bank banned Delta Bank, the 14th biggest bank in the country, from opening up any new customer accounts until mid- June because it had missed a series of payment deadlines. Kazakhstan’s banking sector has been under increased pressure because of an economic downturn linked to a drop in oil prices and a recession in Russia.
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(News report from Issue No. 330, published on May 28 2017)
TBILISI, MAY 23 2017 (The Conway Bulletin) — London-listed Bank of Georgia issued 500m lari of debt ($200m), the first corporate bond denominated in Georgia’s national currency.
Georgian PM Giorgi Kvirikashvili said that the issue was a major victory for Georgia and showed that investors had confidence in the national economy and the national currency.
“International investors trust our country and our national currency. It is a momentous event, and I would like to congratulate everyone,” he said.
The Bank of Georgia debt is due to mature in 2020 and has a coupon of 11%.
Fitch the ratings agency gave the Bank of Georgia debt issue a BB- rating and said that this “reflects the bank’s adequate asset quality, reasonable capitalisation, sound profitability metrics and stable funding profile.”
Bank of Georgia has been listed on the London stock exchange since 2012. Its stock is now trading at 3,744p, an all-time high, against a price of around 3,000p in January.
For investors in the West, the Bank of Georgia debt issue not only gives them exposure to the Georgian financial sector but also to the lari. It has performed well this year, currently trading at 2.41/$1 compared to 2.76/$1 at the start of the year.
Much of this strengthening has been linked to a general uplift for Emerging Market stock and currencies as oil prices have stabilised, but some of it is specific to Georgia. Western analysts rate Georgia’s economy as the most diversified in the region and best equipped to cope with shocks.
Bank of Georgia and local rival TBC are the only banks in Central Asia and the South Caucasus to be listed on the LSE.
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(News report from Issue No. 330, published on May 28 2017)
MAY 24 2017 (The Conway Bulletin) — Tourist numbers in Armenia have risen by 25% between January and April, media reported by quoting the chairperson of the economy ministry’s tourism committee, Zarmine Zeytuntsyan. She said the number of tourists from China, Iran and Russia had risen.
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(News report from Issue No. 330, published on May 28 2017)
MAY 24 2017 (The Conway Bulletin) — Armenia and Iran signed a deal to jointly develop their agricultural potential, highlighting just how improved relations between the two neighbours has become. The joint development will focus on fighting pests together and quarantines. Trade between Iran and Armenia has increased as both countries have steadily tried to attract new allies.
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(News report from Issue No. 330, published on May 28 2017)
MAY 26 2017 (The Conway Bulletin) — Kazakhstan’s first uranium enrichment facility will become operational by 2019, an official at the Ulba Metallurgical Plant told Reuters. The project is a joint venture with China, which will take delivery of the enriched uranium for its nuclear power stations. Kazakhstan produces 40% of the world’s uranium but doesn’t yet have an enrichment facility.
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(News report from Issue No. 330, published on May 28 2017)
MAY 28 2017 (The Conway Bulletin) — Profit at Georgia’s London-listed TBC Bank rose by two-thirds to nearly 100m lari ($40m) highlighting the increasingly upbeat assessment of the Georgian banking sector.
The bumper results also pushed up TBC’s share price to an all-time high of 1,695p. This is nearly an 18% increase from the start of the year and is an increase of roughly 65% from when TBC listed in August.
The main driver of this improvement has been an overall strengthening of Georgia’s economy. The region has been hit hard by a downturn in economic conditions, linked to a collapse in oil prices and also a recession in Russia.
TBC’s main rival, the London- listed Bank of Georgia, has also been hitting similar all-time highs. As well as boosting its stock price, Bank of Georgia also gain a PR boost when it issued 500m lari debt, the first corporate issue in lari.
Elsewhere, KAZ Minerals has been performing well. It’s been yoyo-ing around and has regained much of the ground lost in March. KAZ Minerals is a major copper producer and its share price follows copper prices to a large extent.
It is now trading at 506p, up from 430p at the beginning of the month but down from highs of 589p hit in mid-February.
KAZ Minerals used to by known as Kazakmys, which was linked by transparency campaigners to Kazakh Pres. Nursultan Nazarbayev.Stock market: Georgia’s TBC, Kaz minerals
MAY 23 2017 (The Conway Bulletin) — Under new rules brought in to crack down on potential terrorism, telecoms companies operating in Kazakhstan will have to store details of all calls and other communications for up to two years, media reported. Rights campaigners said that the new rules were designed to crackdown on civil liberties. Telecoms analysts said that the new rules would increase prices for consumers.
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(News report from Issue No. 330, published on May 28 2017)
MAY 25 2017 (The Conway Bulletin) — Azerbaijan has spent the equivalent of 18% of its GDP propping up its banking sector in 2015/16, Peter Paklin, assistant vice president at Moody’s Investors Service, told a press conference. Despite the state support, Azerbaijan’s banking sector has been faltering, with its biggest bank — the International Bank of Azerbaijan — restructuring its debt and smaller banks going bankrupt.
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(News report from Issue No. 330, published on May 28 2017)
MAY 16 2017 (The Conway Bulletin) — French car producer PSA, the maker of Peugeot and Citroen cars, signed a deal with Uzbekistan’s state-owned Uzavtosanoat to set up a factory in the Free Industrial Zone of Jizzakh, media reported. The plan is to produce light commercial vehicles for the Uzbek and wider Central Asia markets. For Uzbekistan, attracting investment from PSA is a major success. It already operates a JV with the US’ GM. The car market, though, has slumped over the last few years as the economies in Central Asia and Russia, a major market, have dipped.
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(News report from Issue No. 329, published on May 20 2017)
MAY 16 2017 (The Conway Bulletin) — Ratings agencies downgraded debt issued by the International Bank of Azerbaijan, as the country’s biggest bank appeared to teeter towards a collapse.
There were fears too that the bad debt piling up at the IBA may damage finance systems across Central Asia and South Caucasus after it emerged that Kazakhstan’s Single Pension Fund had bought $250m of IBA debt over the past few years.
Kazakh MPs accused the Pension Fund of incompetence for investing in IBA in October 2014 shortly after the price of oil started to fall. At the time analysts warned that IBA was at risk of accumulating mountains of bad debt that could sink it.
Moody’s said it had downgraded IBA’s rating to Caa3 from B1, effectively shifting IBA debt from risky to extremely risky.
“Moody’s expects the announced foreign debt restructuring plan to result in credit losses for creditors in excess of 20%,” it said. Media reported that Cargill and Citibank are two of IBA’s biggest creditors.
Last week, IBA filed for Chapter 15 protection in the United States after it failed to make a $100m debt repayment to Netherlands-based Rubrika Finance on May 10. Chapter 15 prevents creditors going after IBA while it restructures its $3.33b debt. The Azerbaijani government is the bank’s biggest shareholder, now holding an 80% stake, and its fall is a major embarrassment to it. Not only has it bought equity in the bank, it increased its stake from 55% earlier this year, but it has also spent nearly $6b buying up its toxic debt.
Media quoted IBA chairman, Khalid Ahadov, as saying that its restructuring plan will be presented in London on May 23.
“Upon completion of these measures, the Bank’s capital position will return to regulatory frameworks,” he was quoted as saying. “As a result of all those measures long-term financial sustainability of IBA will be ensured that will increase its market value on the threshold of privatisation.”
But the reputational damage inflicted by the near-collapse of IBA will undermine Azerbaijan’s status in the financial markets. Last year several smaller banks collapsed or had their license withdrawn by the Central Bank. In 2015, the Azerbaijani manat was devalued twice, halving its worth. With many mortgages and personal loans given out in US dol- lars, consumers found it near-impossible to service their debt.
Azerbaijan has been particularly hard hit by the fall in oil prices. Its economy is reliant on oil exports. Despite repeated warnings, it has failed to diversify.
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(News report from Issue No. 329, published on May 20 2017)