Page 4 - FSUOGM Week 48 2019
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FSUOGM COMMENTARY FSUOGM
Investors still waiting for big Kazakh IPOs
Out of the major IPOs promised in 2016, the only one to materialise as been a sale at Kazakhstan’s national uranium concern
KAZAKHSTAN
KAZAKHSTAN pledged to undertake an ambi- tious privatisation programme in 2016, aimed at replenishing its finances with foreign capital in the face of low oil prices. Three years on, inves- tors are still waiting on many of the promised ini- tial public offerings (IPOs) at big state companies to materialise.
Kazakh Finance Minister Alikhan Smailov on November 25 confirmed reports that the stock market debuts of state-run oil and gas pro- ducer KazMunayGas (KMG), national airline Air Astana and telecoms operator Kazakhtele- com had been postponed until 2020. Officials are waiting for the valuation of these enterprises to improve, he said, in line with advice given by government-hired advisors.
The Central Asian country had set out to list all three companies this year, but investors did not place too much trust in the plan, given Kazakhstan’s reputation for backtracking on major privatisation sales. Another IPO to be shelved this year was at Kazakh fintech group Kaspi.kz. One sale that did go through was for a 15% stake in uranium producer KazAtomProm last year.
The crown jewel of Kazakhstan’s privatisation offering is KMG, a vertically integrated company with stakes in all of the country major upstream projects, control of networks of oil and gas pipe- lines and refineries in Kazakhstan and Romania, and a chain of filling stations across southern Europe. Its main owner, sovereign wealth fund Samruk-Kazyna, had announced it would float up to 25% of KMG to raise $3-5bn.
Speaking to NewsBase in the past, analysts have pointed to reluctance on the Kazakh side to share its prized state assets as a factor behind the delays. Privatisation is more of a priority at times of economic crisis, but Kazakhstan’s finances have improved somewhat since oil prices bot- tomed out in early 2016.
In KMG’s case, investors have also been deterred by issues with corporate governance. Kazakhstan had intended to arrange a sale of a stake in KMG to Royal Dutch Shell ahead of an IPO to ensure the offering’s success. But Shell reportedly pulled out after conducting due dil- igence that flagged up risks related to the infor- mal control over the company exercised by then Kazakh president Nursultan Nazarbayev’s son- in-law, Timur Kulibayev.
External factors have also played a key role in
Kazakhstan’s privatisation drive losing momen- tum. Equity investors across the world are being put off by widespread market uncertainty, linked to the US-China trade war, Brexit and ongoing sanctions against Russia and Iran, not to men- tion the global economic slowdown. Emerging markets such as Kazakhstan have suffer the most.
There may also be some competition for capital between Kazakhstan and neighbouring Uzbekistan, which is taking steps to open its economy to foreign investment.
Smailov added that the listing of national railroad operator Kazakhstan Temir Zholy would also take longer to prepare as well, as the company is working on replacing its foreign debt with domestic borrowing.
Each company scheduled for an IPO is set to go through a dual listing, with the new Astana International Exchange (AIX), launched last year, expected to play a leading role. AIX hopes to draw liquidity to succeed in creating a fully functioning stock market in Kazakhstan. The country’s first stock exchange, the Kazakhstan Stock Exchange (KASE) in the commercial cap- ital of Almaty, has failed to make the grade due to a lack of liquidity. That has partially stemmed from barriers to entry faced by foreign investors.
The AIX is 25.1%-owned by the Shanghai Stock Exchange. US investment bank and finan- cial services firm Goldman Sachs also recently bought a 4.1% stake in the Astana bourse.
Last year, Kazakhstan hoped to sell small stakes in some of its largest state-run companies ahead of its planned IPOs for 2018-2020. The idea was to make the companies more attractive to foreign investors. Some of these sales went through while others did not, with investors generally coming away disappointed with the offering.
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w w w . N E W S B A S E . c o m Week 48 04•December•2019
