NOV. 9 2015 (The Conway Bulletin) – After a four-month-long review linked to a drug doping scandal, Astana Pro cycling team received its World Tour licence. Astana Pro, which is funded by the Kazakh sovereign wealth fund Samruk-Kazyna and races in the national colours, has been involved in several doping cases since it was set up in 2007.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 10 2015 (The Conway Bulletin) – In what it described as a push to promote competition, the Kazakh government said it will cut subsidies for bread, petrol, and animal husbandry. In particular, the government will cut subsidies for wheat producers from 2,500 tenge/tonne ($8) to zero. The government may be looking to save money.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 11 2015 (The Conway Bulletin) – Kazakhstan will sign an expanded partnership agreement with the EU next month, according to PM Karim Massimov. Speaking at a forum on Eurasian economic integration, Mr Massimov said Kazakhstan wanted to build on the Enhanced Partnership and Cooperation Agreement it signed last year.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 10 2015 (The Conway Bulletin) — The Kazakh Central Bank approved a request to modify the shareholder composition of Kaspi Bank. President Nursultan Nazarbayev’s nephew Kairat Satybaldy and Mikhail Lomtadze, chairman of Kaspi Bank, transferred their shares and joined the holding company JSC Kaspi, headed by Kaspi Bank director Vyacheslav Kim. Kaspi Bank is the 6th largest bank in Kazakhstan by assets.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 11 2015 (The Conway Bulletin) – Kazakhstan wracked up a $4b current account deficit in the first nine months of 2015, the Central Bank said, a direct consequence of the fall in the price of oil and gas — its main exports.
This deficit compares with a $6b surplus in the same period last year and shows the impact of the collapse in energy and commodities prices.
The volume of Kazakhstan’s oil and commodities exports was the same in the first nine months of this year compared to last year but they dropped, heavily, in value, earning Kazakhstan far less cash.
The Central Bank data will intensify pressure on the Kazakh government to diversify its economy away from oil and gas.
And Kazakhstan’s monetary policy also played a role in current account deficit too.
Until the Central Bank abandoned its US dollar peg in August, after stubbornly refusing to devalue alongside the Russian rouble, Kazakh exports to Russia were just too expensive. And this hurt Kazakh industry. Russia is one of its main export market.
And this showed up in Kazakhstan’s trade balance. Although still positive, it shrank by almost two thirds. In Jan-Sept 2015, Kazakhstan’s exports exceeded imports by $10.7b, a drop from $30.6b during the same period in 2014.
These figures are a stark reminder of the impact of the regional economic malaise on Kazakhstan. The 40% devaluation of the tenge after the Central Bank ditched its US dollar peg will help Kazakh exporters but the government really needs an increase in oil and gas prices to restore its revenues.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 11 2015 (The Conway Bulletin) – The social networking site LiveJournal will be available again in Kazakhstan, the government said. LiveJournal, which is popular in the former Soviet Union, was banned in August 2011 for “propagating terrorism and extremism.” Kazakhstan has been criticised for cracking down on free speech.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 10 2015 (The Conway Bulletin) – State workers in Kazakhstan will receive pay rises next year of 7-29% to offset the devaluation of the tenge, media reported quoting social development minister Tamara Duysenova. The figures show just how pronounced the anticipated devaluation-linked inflation is likely to be.
The tenge has fallen by 40% in value since its US dollar peg was ditched in August and analysts have warned of a corresponding surge in inflation.
This has already begun to seep through. The Central Bank said that annualised inflation jumped to 9.2% in October, double the rate in September. The announcement on the size of the state pay rises, though, suggests more price rises are likely.
Most of the state employees that Ms Duysenova said would receive a pay rise were doctors, nurses and teachers.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 13 2015 (The Conway Bulletin) — The whole post-Soviet region has faced a steep economic downturn over the past year, leading to regional trade imbalances that have travelled across borders.
Initially, the fall in the value of the Russian rouble hit the Kazakh tenge. Despite a 20% devaluation in Feb. 2014, the tenge’s peg to the US dollar made it increasingly expensive against the rouble. When the rouble started to lose double- digit value against the US dollar, the tenge held its US dollar trading point, making it increasingly expensive. For the first eight months of this year, cheap Russia goods flooded Kazakhstan.
Eventually, in August, the Kazakh Central Bank effectively ordered another devaluation by ditching a US dollar peg. The graph below illustrates this clearly. It shows the rouble/$1 rate and the rouble/tenge rate matching each other until August. The value of the rouble, according to the graph, halves against the US dollar and the tenge.
In August, though, there is a sharp correction in the trading rate of the rouble/tenge. It diverges, violently almost, with the rouble/$1rate. The graph shows that the tenge is still stronger than the rouble compared to June 2014, but the differential is reduced.
And this is where the ripple effect carried through to neighbouring Kyrgyzstan.
Thee blue line on the graph represents the rouble/som rate. It, broadly, matches the peaks and troughs of the rouble/$1 rate, suggesting an informal peg to the US dollar.
The Kyrgyz Central Bank, though, has clearly tried to devalue the som independently too, as the rouble/som rate diverges slightly from the rouble/$1 rate.
The yellow line shows the tenge/som rate, and clearly depicts the change in relative values of the two neighbours’ currencies. The som has been weaker against the tenge for most of the year, as shown by the fairly shallow but pronounced trough. This changes after the tenge devaluation in August.
A currency domino effect, although slower than analysts had predicted, is rippling through Central Asia. The rouble is an optimal benchmark to observe this phenomenon.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 10 2015 (The Conway Bulletin) — As the Bulletin reports on its front page, Georgia Healthcare Group (GHG) listed on the London Stock Exchange with an initial share price of 170p on Nov. 9. The company listed 29% of its shares, valuing the company around £218m ($331m). By Friday its shares had dropped to 181p.
Oil and commodities companies lost ground on the London stock market after Brent and copper prices fell by 6% and 4.5% this week.
Linked to this fall in the price of Brent crude futures, Kazakhstan-focused Nostrum Oil & Gas shares were down 16% closing at 367.5p. Nostrum recorded an 8% fall on Thursday, placing its shares among the worst performers on the FTSE 250.
Cooper producer KAZ Minerals, formerly known as Kazakhmys, faired worse. Its shares fell by 20% over the week, closing at 80p.
Tethys Petroleum shares jumped by 53% on Monday following Olisol’s letter of intent to acquire its stakes, but finished the week down to 4.25p.
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(News report from Issue No. 256, published on Nov. 13 2015)
NOV. 9 2015 (The Conway Bulletin) – Under a scheme designed to help people in Kazakhstan who hold mortgages in US dollars cope with the devaluation of the Kazakh tenge, the Central Bank said that it had refinanced 3,500 mortgages by Nov. 1. The programme will run until March or April 2016.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 256, published on Nov. 13 2015)