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36 I Outlooks 2019 bne February 2019
The Kazakh government has pledged
to pump KZT423bn (€1.2bn) into the country's grain industry during 2017- 2021 as part of a programme to improve industry profitability by 30%-40%. The Central Asian nation aims to develop its agricultural sector in order diversify itself away from oil exports over-reliance. In the long-term, the ex-Soviet state hopes to increase its grain exports by focusing on the higher margin crops. The biggest Kazakh wheat importers in the 2017-2018 marketing year were Tajikistan, China, the EU, Afghanistan, Turkey, Azerbaijan, and Central Asia's most populous
nation, Uzbekistan, which remains the biggest buyer of Kazakh grains.
Banks
The Kazakh government is continuing
its rescue work in the banking sector that was almost destroyed by the 2008 crisis and the lesser shock from the
2014 collapse of the oil prices. The government and the central bank have been pushing forward rescue packages for the largest banks. They were launched last year and will continue in 2019.
Lingering difficulties might still be troubling the Kazakh banking sector despite last year’s $7.5bn bailout
by the state. The country’s second largest lender, Tsesnabank, received €1.1bn in support from the central bank in the fourth quarter and
also appears to be exposed to bad loans in the agricultural sector.
The International Monetary Fund has criticised the Kazakh sovereign for doing not enough in restructuring local banks. Recent capital injections might prove insufficient for removing systemic risk going forward.
The country’s banking sector – still
not fully recovered from the 2008-09 financial crisis – has been hit by a rise in bad loans since the slump in world crude oil prices and the tenge free-float in 2015, which depressed the entire Kazakh economy for two years until it switched trajectory and headed for recovery in 2017. The bailing out of Kazakhstan's largest banks has included a merger
deal between KKB and Halyk, turning Halyk into the biggest Kazakh lender.
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Funding and finance
In 2018 Kazakhstan got its first every euro-denominated Eurobond away and may tap the markets again in 2019. Kazakhstan sold a dual tranche transaction consisting of €525mn of a 1.55% Eurobond due in November 2023 and €525mn of a 2.375%
bond due in November 2028. The combined order books exceeded €3.3bn compared to the €1.05bn allocation. The move marked the first time ever that a euro-denominated transaction came from the Kazakh sovereign.
The Central Asian country is among many emerging market nations that have switched to euros due to the growing gap between US and European interest rates. Kazakhstan has prioritised dollar sales for the past 20 years with
its dollar debt in July 2015 peaking at $4bn in 10-year and 30-year notes.
Kazakhstan’s foreign currency debt ratings are BBB with a stable outlook from Fitch, BBB- (stable) from S&P and Baa3 (stable) from Moody’s. Kazakhstan last sold dollar debt in July 2015, when it raised a record $4bn in 10-year and 30-year notes. Astana is more and more
in September. KMG accounts for 28% of the total crude oil and gas condensate output in the Central Asian nation.
The news indicates progress in the Kazakh government’s plans for initial public offerings (IPOs) of the largest state-run companies, which are set to be floated in 2018-2020 with the goal of selling stakes of
at least 25% in each company.
Other names on the privatisation list are the world’s biggest uranium miner Kazatomprom, national carrier Air Astana and soon-to-
be near monopolist of the local telecoms market Kazakhtelecom.
At least five more IPOs of large state- owned companies are expected
to take place within the next two years, culminating in national oil producer KazMunaiGas’ (KMG’s) listing that is expected to bring the privatisation phase to an end in 2020.
In hope of drawing in liquidity to the newly launched Astana stock exchange, the government wishes to also partially list the firms domestically. The exchange,
“Kazakhstan may attempt to list its oil and gas company KazMunayGaz (KMG) state oil company in London in 2019”
looking at expanding the geography of its borrowing, with plans also including yuan-denominated securities.
RBI International analysts said last week that their “current recommendation on Kazakh eurobonds is ‘Hold’ taking into account the latest macro improvements while the medium-term outlook is positive due to a stronger likelihood of
a positive re-rating of Kazakhstan by the leading rating agencies in 2019”.
Kazakhstan may attempt to list its oil and gas company KazMunayGaz (KMG) state oil company in London in 2019 and has already invited investment banks to bid on organising the tender, it was reported
however, is apparently not in a position to list KMG until the second half of 2019. This would be in line with the previously announced plans. The government hopes to provide a boost to its Astana Interna- tional Financial Centre (AIFC) which was officially launched in December 2018. It is designed to become a banking and trading hub for all of Central Asia.
Kazakhstan’s capital market may go through major change in 2019 having been hooked up to the Clearstream international settlements system in July 2018. Russia made a similar reform in 2012 and saw foreign investors flood into its bond and stock markets.