Tag Archives: Kazakhstan

Business comment: Bailing out savers

OCT. 7 2015 (The Conway Bulletin) — Banks in Kazakhstan and Kyrgyzstan are bracing themselves for tough times ahead. The currency crisis that has hit the region has, it feels, still a long way to run. Central Banks in both countries have pledged to help commercial banks in the short term to prevent falls in the values of the tenge and som from spiraling into panic and a run on the banks.

This is sensible.

The Kazakh Central Bank said it would compensate savings accounts in tenge that have so far lost 46% in US dollar terms after the regulator moved to a free-float policy. Across the border, in Bishkek, the Central Bank laid out new measures to help customers pay their dollar- denominated mortgages, which have become more expensive as the som lost value.

When people lose confidence in their currency, as is happening across Central Asia and the South

Caucasus, Central Banks intervene. In both countries, new policies were adopted to limit the amount of loans in foreign currencies, to ensure stability in the market.

These short-term measures, however, may have serious repercussions down the road. Bailouts can have an adverse effect on these countries’ sovereign ratings and they could, in any case, be insufficient to reverse the economic downturn.

Let’s see how these policies fair against a falling currency market.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Currency: Kazakh tenge, Kyrgyz som

OCT. 2-8 2015 (The Conway Bulletin) — The Kazakh tenge lost 1.5% of its value over the past week, ending at 274/$1.

Much of this perceived strength appears to lie with the Central Bank’s little secret — intervention. Despite promising never to intervene in the currency again, the Kazakh Central Bank has spent another $367.5m this week propping up its currency.

Over the border in Kyrgyzstan, the som crept briefly over 69/$1 on Oct. 6, before settling back to 68.9 in a week that saw little of the violent fluctuations of previous episodes. The Kyrgyz Central Bank also intervened in the market, selling $10.2m.

No doubt the successful and peace- ful parliamentary elections would have played well to the steady currency markets. European vote monitors were certainly impressed and that is good for Kyrgyzstan’s image.

The Georgian lari was also stable last week at 2.40. Positive economic data and a substantial stability in foreign reserves reassured lari holders.

The Tajik somoni continued its gradual devaluation against the dollar. By marginally weakening every week, the somoni has lost 2.5% of its value against the dollar over the past month.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Foreign currency deposits rise in Kazakhstan

OCT. 6 2015 (The Conway Bulletin) – The proportion of savings in Kazakhstan held in foreign currency measured 78% in August, according to the ranking.kz website, a sharp increase from a year earlier. Foreign currency deposits in August 2014 measured 60% of the total. Kazakh savers have gradually lost faith in their currency.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Markets: Inflation and growth in Kazakhstan, Kyrgyzstan and Azerbaijan

OCT. 7 2015 (The Conway Bulletin) — Analysts in Kazakhstan have revised their inflation expectations down to 7.1% this year after official data showed that the consumer price index grew by only 1% in September.

Halyk Finance researchers said the numbers are much more encouraging than what they forecasted. This should keep inflation within the Central Bank target of 6-8%. Central Bank chairman Kairat Kelimbetov said he doesn’t rule out the possibility of a further increase in interest rates, after a new rate was set at the end of last week.

The Eurasian Development Bank (EDB) said in a report that Kyrgyzstan’s economy is poised to grow by 1.8% this year. This came after PM Temir Sariyev disclosed more optimistic numbers, pointing out that in Jan.- Sept. 2015, the country’s economy grew by 6%. The EDB said it expects a marginal slowdown in economic activity in Q4 2015.

The IMF has dramatically increased its forecast for Azerbaijan’s growth in 2015, from a meagre 0.6% in April to 4% in its latest report.

The international lender also revised inflation expectations downwards from 7.9% to 5% for 2015, more good news.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Telenor also says to quit region’s mobile phone market

ALMATY, OCT. 5 2015 (The Conway Bulletin) — Following hard on the heels of Scandinavian rival TeliaSonera, Norwegian telecoms company Telenor effectively said it wanted to quit Central Asia and the South Caucasus when it announced that it would sell its 33% stake in Russian mobile operator Vimpelcom.

Vimpelcom owns several subsidiaries in Central Asia and the South Caucasus under its Beeline brand and allegations of corruption, much like those that have dogged TeliaSonera’s companies in the region, have gathered momentum over the past year.

Vimpelcom, which is headquartered in the Netherlands, has had a rough year losing about one third of its share value because of the worsening economic downturn in Russia and the general lack of profitability for telecoms companies across the Eurasian region.

Sigve Brekke, Telenor’s CEO, said the company was leaving the post- Soviet region to focus on its core operations in Europe but analysts said the real reason may well be the allegations of bribery levelled at the Vimpelcom subsidiary in Uzbekistan. Indra Overland, a research professor at the Norwegian Institute of International Affairs, said the corruption scandal involving Vimpelcom in Uzbekistan had damaged Telenor’s reputation.

“Telenor has been badly burned by its implication in the corruption scandal in Uzbekistan,” he said.

News that Telenor wants to quit Central Asia and the South Caucasus is another blow to the region’s reputation as a place for Western companies to do business.

Overshadowed by an increasingly gloomy economic outlook which has forced currencies to devalue and inflation to rise, Western companies in Central Asia also appear to have had enough of the region’s suspect corporate governance record.

An allegation of bribery emerged against Vimpelcom subsidiaries during investigations in the US, Sweden and in the Netherlands last year. Prosecutors said Vimpelcom had paid a bribe to gain access to Uzbek mobile licences, similar to a charge levied against TeliaSonera.

Telenor’s shares could go up for sale for approximately $2.4b and analysts said Vimpelcom’s main stake- holder Mikhail Fridman might seize the opportunity to consolidate his ownership. Daniel Johansson, an analyst at Fondsfinans, told Bloomberg: “There’s zero chance that it will be someone else completely unknown, like a Western investor.”

Vimpelcom has not commented on speculation it could buy Telenor’s stake in its businesses.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Kazakh Central Bank receives more pressure

OCT. 6 2015 (The Conway Bulletin) – Piling more pressure on the Kazakh Central Bank, Vijay Mahadevan, CEO of steel maker ArcelorMittal Temirtau, said its decision to cut the tenge free from its US dollar peg in August was a good one but that it needed to devalue further. Mr Mahadevan said the tenge was overpriced against the rouble.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Inflation in Kazakhstan begins to accelerate

OCT. 7 2015, ALMATY (The Conway Bulletin) — The Consumer price Index (CPI) in Kazakhstan grew by 1% in September, official data showed, matching analysts’ predictions of accelerating inflation after a devaluation of the tenge in August.

Analysts had forecasted higher price inflation for September after the Central Bank cut its peg to the US dollar on Aug. 20, triggering a sharp fall in its value.

Halyk Finance, part of one of Kazakhstan’s largest banks, said that a drop in government spending, tighter economic policies and wage cuts had acted as a brake on inflation but it still measured 4.8%.

It said that there were inflationary pressures in the Kazakh economy but that the weaker tenge was not going to have as big an impact as analysts had thought at first.

“We do not expect weaker tenge to have a considerable effect on food price growth. We revised our year- end inflationary expectations downward to 7.1% y-o-y,” analysts Askar Akhmedov and Nurfatima Jandarova wrote in the Halyk Finance report.

These sentiments will come as a relief to the Kazakh Central Bank which has been under fire this year for its handling of the economy. Last week it raised its key interest rate to 16% from 12% to help strengthen the tenge and also dampen inflation.

One of the main inflationary pressures comes from a sharp rise in the price of petrol after the Kazakh government abandoned controls on it last month.

The official data showed that petrol prices rose 14% last month.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Starbucks opens in Kazakh city

OCT. 2 2015 (The Conway Bulletin) — Starbucks said it would open two stores in Almaty, Kazakhstan’s business capital, its first stories in Central Asia. The two stores will be located in shopping malls owned by the brand Mega. With the new opening, scheduled for 2016, Starbucks will have stores in 67 countries globally.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Kazakh CBank delays move

OCT. 7 2015 (The Conway Bulletin) – The Kazakh Central Bank will probably delay its high-profile move to Astana from Almaty because of the worsening financial crisis, Central Bank chief Kariat Kelimbetov said. The Central Bank is the last remaining major government institution based in Almaty. It was slated to move to Astana by 2017.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)

Kazakhstan-oriented miner borrows $352m from Russian bank

ALMATY, OCT. 7 2015 (The Conway Bulletin) — VTB Bank, majority owned by the Russian government, agreed to loan $352m to Eurasian Resources Group (ERG), highlighting the Kazakhstan-orientated miner’s need to borrow cash during a period of low commodities prices.

The company, which also operates in Africa, will use the funds to finance the upgrade of two aluminium plants in Kazakhstan.

ERG, owner of ENRC which was previously listed on the London Stock Exchange and has close connections with the Kazakh elite, has an outstanding debt with VTB of around $3b, according to Reuters.

ERG now owes Sberbank, another Russian bank, and VTB a total of $.4.4b, said Reuters. Last September, the company secured around $2.5b in financing from Chinese banks.

Earlier in June, VTB said it would postpone ERG repayment to 2021.

Alexander Mashkevich, ERG chairman, said at the time: “VTB Bank is a longtime strategic partner of Eurasian Resources Group, and the new agreement reaffirms our mutually beneficial and effective cooperation.”

The loan is confirmation of VTB’s willingness back ERG during the slump in commodities’ prices.

ENDS

(News report from Issue No. 251, published on Oct. 9 2015)