Tag Archives: Kazakhstan

Volatility to weaken the Kazakh tenge

AUG 1 2016 (The Conway Bulletin) — It has taken Kazakhstan a long time, but it could finally have reached its goal of having a free-floating currency.

The nightmare of last August when the tenge depreciated sharply against the US dollar after the Central Bank removed its currency peg, seems over.

That was the uncertainty of having a Central Bank chief, Kairat Kelimbetov, who didn’t show resolve and authority, and the uncertainty of living through a period of falling oil prices.

Gradually, since November 2015, when Daniyar Akishev was made the Central Bank chief, Kazakhstan has switched to a more hands-off policy, allowing the tenge to slide as the market demanded.

This new policy created another kind of uncertainty. The tenge will float freely, swept by oil prices and the performance of other currencies in the region.

This could mean that, with oil prices sliding back towards $40/barrel and the US Federal Reserve planning to raise interest rates, Kazakhstan could soon be facing an even weaker tenge.

The tenge depreciated by 5% this month, to 354/$1 and the outlook for the next few months is not promising. Analysts have said that this could be the beginning of a gradual slide that only much higher oil prices could reverse.

In an oil price scenario that has come to be known as ‘lower for longer’, a three-figure oil price, as it was in 2014, will remain unlikely for a while.

In addition, the Russian rouble seems to be limping behind the US dollar, which is causing a negative ripple effect on currencies across Central Asia and the South Caucasus. Kazakhstan’s membership of the Eurasian Economic Union bloc is, in this case, a determining factor for the tenge.

Domestically, too, with apparent terror attacks in western Kazakhstan and unprecedented violence on the streets of Almaty, the situation is not looking good. Insecurity has never been a foundation for currency stability.

And then, of course, there is the economic headache of negative growth, and falling oil production which will continue to undermine the tenge.

The tenge is unlikely to thrive in this contingency.

The ‘$1 stores’ that mushroomed across Kazakhstan towards the end of last year, selling items at the fixed price of 300 tenge, might now be forced to adjust their price, possibly on a daily basis, to reflect a worsening exchange rate.

ENDS

(News report from Issue No. 291, published on Aug. 1 2016)

Gunman kills 5 people in Kazakh city, sparks terror attack warnings

ALMATY, JULY 18 2016 (The Conway Bulletin) — A lone gunman killed five people in Almaty, sparking a rare terror alert in Kazakhstan’s financial centre.

Initially Kazakh officials drew a link between the gunman, Ruslan Kulikbaev, who shot dead four policemen and a passerby and Salafism, a devout Arabic form of Islam blamed for terror attacks, suggesting that he had become radicalised while in prison for an earlier crime.

This triggered a red terrorism alert in Almaty. Shops closed; people stayed inside.

But before the day was out, officials changed their story and reported that Kulikbaev was a lone gunman with criminal rather than religious intentions who had killed a prostitute the day before his Almaty rampage. He was later captured alive.

For analysts critical of the government, officials’ quick use of the terrorism label, underlined their knee-jerk reaction to play the security card to bolster President Nursultan Nazarbayev’s popularity.

Others, though, were more sanguine.

This year Kazakhstan has warned about a growth in attacks linked to the IS radical group which has targeted Central Asia as a prime recruiting ground and Aidos Sarym, an Almaty-based analyst, said Monday’s terror alert would damage the country’s reputation for stability.

“It’s definitely terrorism and it may damage Kazakhstan’s stability and security image prior to EXPO 2017 (in Astana),” he said

ENDS

(News report from Issue No. 290, published on July 22 2016)

Oilfield in Kazakhstan issues bond

JULY 21 2016 (The Conway Bulletin) — Tengizchevroil (TCO), the Chevron- led consortium exploiting the Tengiz oilfield in western Kazakhstan, issued a $1b 10-year Eurobond with a 4% coupon, lower than previously forecast, RIA Novosti said. Earlier in July, TCO approved a $37b expansion plan, which will boost production at Tengiz by 45% by 2020.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Car sales drop in Kazakhstan

JULY 20 2016 (The Conway Bulletin) — Kazakhstan’s car production shrank by 62.2% to 2,980 units in H1 2016, compared to the same period last year, according to the Statistics Committee. This fall in car sales is an important indicator of the health of the economy and people’s expectations as to where it is heading.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazmunaigas and KMG EP

JULY 22 2016 (The Conway Bulletin) — Kazakhstan’s oil and gas sector seems to be in a muddle with the corporate battle between Kazmunaigas, owned by the country’s sovereign wealth fund Samruk-Kazyna (90%) and the Central Bank (10%), and its London-traded upstream subsidiary, KMG EP.

The power struggle between the two seems complicated, but it’s not. Kazmunaigas’ covert intention is to increase its 57% stake in KMG EP because it wants to take more control of its profitable upstream business, especially now that oil prices are low.

KMG EP’s independent directors, on the other hand, want other minority shareholders to resist Kazmunaigas’ pressure. The alternative, according to them, will be a de-listing from the London Stock Exchange, as independence would not be guaranteed.

Kazmunaigas has always said that its primary intention is not to buy out its subsidiary, but to change the terms through which the two companies interact, to smooth bureaucracy and make the businesses more agile.

But that’s not its real goal. If it was, it would have not have raised its initial offer to minority shareholders of $7.88/GDR to $9/GDR. And it would have not have made concessions on its corporate governance plans immediately after the first negative reaction from KMG EP’s independent directors.

If Kazmunaigas gets its way and buys out most of the minority shareholders, it may force independent directors to resign and the company to de-list from London’s GDR market.

For investors looking for a transparent sector to bet on, this won’t be good news.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazakh court jails IS activist

JULY 19 2016 (The Conway Bulletin) — A court in Petropavlovsk, in northern Kazakhstan, sentenced a man to seven years in prison for joining the IS extremist group. According to the court, the man travelled to Syria in 2012. Warning of a growing IS recruitment drive, Kazakhstan’s security services have said they will intensify their clampdown on Islamic extremism.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Briefing: Region’s economies sputter into life

JULY 22 2016 (The Conway Bulletin) — >>Malaise, downturn recession. What exactly going on in Central Asia and the South Caucasus?

>>All countries in the region are either growing slower than last year or, in some cases, their economies are even shrinking. The crisis is regional, although each country has shown its own specific problems.

>>This is the region-wide problem. I can see but what caused it?

>>The US dollar strengthened so much in 2014 that it triggered a sharp drop in oil and commodity prices. This pulled dollars away from Emerging Markets, like our own patch. As commodity prices sank, Russia fell into a crisis that quickly turned into a recession. The depreciation of the rouble cut the value of salaries earned by migrant workers, triggering a slowdown in remittances to Central Asia and the South Caucasus.

>>Okay, but oil prices picked up again since the 13- year low point in January. Isn’t that good for energy exporters in Central Asia and the South Caucasus?

>>Higher oil prices have helped state-owned oil companies to relax their emergency mode, but they’re still too low to justify the region’s most expensive projects. Think of the Kashagan oil project in Kazakhstan’s sector of the Caspian Sea, or the upgrade of Azeri Chirag-Guneshli oil project in Azerbaijan. Plus there are negative signs for transparency over the re-organisation of government companies and structures in the energy sector in Kazakhstan and Turkmenistan.

>>And what about the other commodities, such as gold and aluminium?

>>Gold is a big component of Kyrgyzstan’s GDP as it depends on the performance of the Kumtor gold mine in the east of the country. This year, operational problems and corporate battles have slowed production, which has significantly hit Kyrgyzstan’s growth figures. It now could slip into a recession. Tajikistan, on the other hand posted a promising 6.6% GDP growth in the first half of 2016 and state-owned smelter TALCO increased aluminium production. But these numbers should be read with caution. TALCO also said that it is currently operating at a loss, as its production costs are 25% higher than market prices.

>>Right, so is it all bad?

>>Not necessarily. Dollarisation, as Georgia’s Central Banker said this week, is still a problem across the region and the currencies continue to be weak. But despite some devaluations and depreciations, most of them have kept steady in 2016, which is a sign that governments want to keep their economies stable and will spend their reserves to prop them up.

>>And for companies looking to do business in the region, how bad is it?

>>If in 2015 we saw scores of international companies running away from projects in Central Asia and the South Caucasus, this year we’ve seen promising developments, such as the final investment decision for the expansion of the Tengiz oil- field in Kazakhstan and the signing of the contract for the construction of the Rogun dam in Tajikistan, both multibillion-dollar commitments. French hypermarket Auchan has also opened up its long-awaited store in Dushanbe. Perhaps confidence is returning or at least a sense of “let’s just get on with it”.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Stock market: Tethys Petroleum, Olisol

JULY 22 2016 (The Conway Bulletin) — Tethys Petroleum’s share price has fallen steadily in the past four months, as the Olisol share buy-in becomes a reality. This week it closed at 1.63p/share in London on Thursday, down 6.9% on the previous week.

The Guernsey-based oil and gas company operates chiefly in Kazakhstan and Tajikistan. In May it reached a final financing agreement with Kazakhstan-based Olisol, which is poised to buy a 42% stake in the company once the deal becomes concrete.

Last week, the company announced the appointment of a new Chief Commercial Officer, Kazakhstan-born Alexander Skripka, who is also a director and shareholder of Olisol.

Mr Skripka had previously worked for state-owned Kaztransgas, the main gas distributor in the country. The link with a state-owned company is perhaps a sign of just how embedded Olisol is in the elite circles of Kazakhstan’s oil and gas sector.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Kazakhstan’s mobile operator posts Q2 revenues 15% down from 2015

ALMATY, JULY 20 2016 (The Conway Bulletin) — Kcell, Kazakhstan’s largest mobile operator, said Q2 revenues were 15.3% lower than last year because of weak economic conditions and aggressive competition which have driven down prices.

Kcell’s Q2 revenues of 36.4b tenge ($107.7m) represented a slight improvement over the previous quarter, when it posted 35.6b tenge ($107), its worst quarter since an IPO in 2012. Importantly, however, Kcell said that its subscriber base is holding up through an economic downturn.

“In the second quarter we started to see some stabilisation in market prices and subscriber numbers,” the company’s CEO Arti Ots said in a statement.

Increased competition and the depreciation of the tenge currency against the US dollar over the past year have knocked revenues for mobile operators in Kazakhstan.

In April 2016, revenues for all mobile companies in Kazakhstan were down by 21% to 68b tenge ($204m) compared to the same period last year, according to government data.

Sweden’s Telia Company owns a 62% stake in Kcell. It has said that it wants to sell this stake because of reputational damage caused by a corruption probe into bribes it paid to enter the Uzbek market.

ENDS

(News report from Issue No. 290, published on July 22 2016)

Islamic banking grows in Kazakhstan

JULY 18 2016 (The Conway Bulletin) — Zaman Bank, a small bank in Kazakhstan, said it had converted into an Islamic financial institution. Kazakhstan’s Central Bank signed off on the deal. With assets of 15.7b tenge ($46.5m), Zaman has a small presence in the Kazakh banking market and only one branch, in Almaty. Zaman will now join Bank Al-Hilal the more prominent Islamic lender in the country. Islamic banking, which promotes lending with an Islamic ethos, is becoming more popular in Central Asia’s finance sector.

ENDS

(News report from Issue No. 290, published on July 22 2016)