FEB. 14 2017 (The Conway Bulletin) — London-listed KAZ Minerals, formerly known as Kazakhmys, has started sulphide production at its Atokay mine in Kazakhstan, the mining-journal.com website reported. It said that production was in-line with expectations and that output would be ramped up throughout the year. KAZ Minerals is best known for its copper production.
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(News report from Issue No. 317, published on Feb.17 2017)f
ALMATY, FEB. 13 2017 (The Conway Bulletin) — Kazakh Finance ministry said it will spend 23.9b tenge ($74.2m) reinforcing its cyber security in a programme it has dubbed CyberGuard, although government critics have said that monitoring opposition activists rather than Islamic terrorists is the main aim of the project.
The project was ordered by Kazakh president Nursultan Nazarbayev who identified in his annual state-of-the-nation speech on Jan. 30 lax cyber security as a problem in fighting Islamic extremists.
Beibut Atamkulov, head of the CyberGuardprogramme, said that progress on the programme had been swift.
“There is a centralised system of communication management called digital border,” he told the media. “We have created security certificates which will allow us to restrict access to illegal information that is encrypted within the borders of our country.”
Experts said this certificate will increase government control over what citizens are sending, receiving and reading on the internet.
Arman Abdrasilov, an Astana- based cyber expert, told The Bulletin that Kazakhstan was copying Russia.
“This is the path Russia has passed along, saying it needed this to tackle terrorism and therefore justifying access to private conversations. We have simply copied the Russian experience,” he said.
Amnesty International human rights group released a report on Feb. 9 on the crackdown of dissenters in social media. The report said the so-called “national security certificate allows the authorities to scan communications sent over the HTTPS protocol, and block access to individual webpages.”
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 13 2017 (The Conway Bulletin) — SCAT, a privately-owned airline based in Shymkent in south Kazakhstan, increased its passenger numbers to 1.269m in 2016 up from 1.229m in 2015, media reported. The slight increase in passenger numbers, though, may mask a drop in relative demand, in-line with the poor economic conditions, because SCAT has increased the number of flights and routes it flies. SCAT mainly flies domestic routes, although it is adding more foreign destinations. In 2013, a SCAT plane crashed near Almaty killing 21 passengers and crew.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 14 2017 (The Conway Bulletin) — Kazakhstan’s culture and sports minister, Arystanbek Mukhamediuly, said that the biathlon team had been cleared of taking any performance enhancing drugs ahead of the World Championships in Austria. Austrian police raided the team’s hotel last week on the eve of the competition after, media reported, finding an empty box with discarded medical equipment.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 17 2017 (The Conway Bulletin) — Georgia Healthcare’s shares surged 8.4% to near an all-time high of 379/$1 after earnings results showed that it had tripled its pretax profit in the fourth quarter of last year thanks to organic growth and acquisitions.
It also said that by the end of 2018, it expects to have doubled its revenues compared to 2015.
Long a favourite for investors looking to invest directly into the South Caucasus, Georgia Healthcare stock gives them a slice of the growing Georgian private healthcare sector.
The only downside of the earnings results was a pretax loss for its insurance division. Still, analysts were bullish. Jefferies increased its target price on Georgia Healthcare to 435p from 420p. Numis Securities stuck with its target price of 420p.
The other big mover of the week was KAZ Minerals, the Kazakhstan-focused copper producer, which finished up 5.7% at 559p. On Tuesday its shares had peaked at 592p, its highest level for nearly four years.
Copper prices have recovered since they started to fall in mid- 2015. KAZ Minerals also announced the start-up of new production in Kazakhstan.
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(News report from Issue No. 317, published on Feb.17 2017)
ALMATY, FEB. 13 2017 (The Conway Bulletin) — The Kazakh government is preparing what would amount to a 2 trillion tenge ($6.5b) bailout of its banking sector only eight years after it was forced to buy up a handful of failing banks during the Global Financial Crisis of 2008/9.
The plan is a virtual admission that policies brought in by the Central Bank since the Global Finance Crisis have failed to prevent another banking meltdown.
The sharp economic downturn triggered by a collapse in oil price in mid-2014, has wiped out jobs, pressured inflation and knocked 50% off the value of the tenge. Despite being forced to increase their capital and pass Central Bank stress tests, the Kazakh banking sector has been hit badly and is now holding billions of dollars of bad debt.
Earlier this month, the IMF said that urgent action was needed to stave off another banking collapse. Now that warning appears to have been heeded by the Kazakh government after it announced the emergency plan.
In a statement on the finance ministry’s website, Bakhyt Sultanov, the finance minister, said that the government would pull in funds from the country’s oil wealth fund to plug the financial shortfall.
The Interfax news agency later reported by quoting the deputy governor of the Central Bank, Oleg Smolyakov, that the cash would be injected into the government’s Problem Loan Fund, through which it has been funnelling cash to banks.
The government has already doubled its loans to troubled banks to 400b tenge ($1.3b), half of which has been borrowed by Kazkommertsbank.
Kazkommertsbank bought the debt-laden BTA Bank in 2014/15 in a deal heavy with political undertones. It is now in talks with Halyk Bank, owned by President Nursultan Nazarbayev’s daughter Dinara and her husband Timur Kulibayev, to merge and create a banking giant.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 14 2017 (The Conway Bulletin) — An informal study of bread prices by the ranking.kz website showed that prices have risen by 8-9% in the past year. This is important because the survey acts as a balance on official inflation data which has said that price rises have been more gentle. Economists have been predicting a jump in prices, linked to the devaluation of the tenge.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 17 2017 (The Conway Bulletin) — First came the oil price collapse, then remittance flows started stagnating and (some) currencies (think of the tenge and the Azerbaijani manat) halved. Now the debt mountain, or perhaps debt tsunami is a better description, looms large, threatening to drown the countries of Central Asia and the South Caucasus.
Kazakhstan is the latest to propose a major bailout of its banking sector. Finance minister Bakhyt Sultanov said on Feb. 13 that the government would potentially use $6.3b to prop up banks listing under the weight of bad loans. The Tajik government is in talks with the IMF to borrow cash to help prop up its banking sector and in Azerbaijan the government has been, as quietly as possible, buying up chunks of the biggest bank. It now owns more than 76% of the International Bank of Azerbaijan, allowing it to smooth out its debt crisis without attracting too much attention.
Ratings agencies and analysts have been warning of this denouement.
As long ago as December 2015, Standard & Poorsratings agency said: “Medium-term prospects for Kazakhstan’s banking system have deteriorated in 2015 due to lower oil prices, the economic slowdown (especially in non-extractive sectors) and the weaker tenge.”
And that prediction has been borne out.
The frustration is that we have been here before. In the Global Financial Crisis of 2008/9 bad debt built up in banks in Kazakhstan forcing the government to step in. It bought out BTA Bank, at the time one of the country’s biggest lenders, and a handful of smaller banks. It was expensive but staved off disaster and the Kazakh government pledged not to find itself in a similar position again.
The government finally offloaded BTA bank to pro-government businessmen in 2014/15 and proposed to impose rules and regulations that would require its banks to bulk up their capital and refrain from handing out loans, mainly mortgages, to people unworthy of them.
Clearly, the Kazakh Central Bank and other regulators across the region, have failed. Certainly they have not been helped by the sharp currency devaluation that made US dollar-denominated mortgages unserviceable.
Better macro-economic policies, tighter rules on lending and a more clear-headed approach to dealing with problems would surely have put the Central Banks in better positions than they now find themselves. Governments in the region are once again having to buy themselves out of trouble.
By James Kilner, Editor, The Conway Bulletin.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 13 2017 (The Conway Bulletin) — Kanat Bozumbayev, the Kazakh energy minister, told media that in 2016 Kazakhstan produced 78m tonnes of oil, beating an initial forecast of 75.5m tonnes. This is important because the government had been forecasting a drop in production because companies were throttling back output under the pressure of poor prices.
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(News report from Issue No. 317, published on Feb.17 2017)
FEB. 13 2017 (The Conway Bulletin) — The Kashagan oil project in the Kazakh sector of the Caspian Sea will double oil production to 370,000 barrels of oil per day by the end of 2017, the North Caspian Operating Company consortium developing the project said in a statement. Kashagan is the Great White Hope of Kazakhstan’s oil industry. It started commercial production at the end of last year, three years behind schedule because pipes running from the mainland to the field were found to be leaky and needed to be repaired.
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(News report from Issue No. 317, published on Feb.17 2017)f