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INTRODUCING KAZAKHSTAN STOCK EXCHANGE INC. (KASE) Relevant as of September 1, 2007 COEVAL OF TENGE … KASE was established at November 17, 1993 under the name of Kazakh Interbank Currency Exchange, two days after the launching of tenge – new legal tender of Kazakhstan. Now, that day (November 15) is celebrated as the official annual holiday "The Day of Financiers". "Old" tenge (1993–2006) "New" tenge (since 2006) YOUNG AND SINGLE … KASE – non-commercial joint-stock company with the 59 shareholders – National Bank of Kazakhstan (the largest shareholder), banks, brokerage firms, asset management companies, pension funds and other professional financial institutions. All of them have only one vote each*. * Item to discuss. YOUNG AND SINGLE … (2) Today and finally KASE is the single universal financial exchange in Kazakhstan with the brief but bright history: 1993 – first trades with the foreign currency (US dollars) 1995 – first trades with the T-bills 1996 – first trades with the derivatives (KZT/USD exchange rate futures) 1997 – first trades with the listed equities 1997 – first trades with the government stacks of shares 1997 – first trades with the non-listed corporate securities 1998 – launching of the OTC securities market within KASE YOUNG AND SINGLE … (3) 1998 – first trades with the eurobonds of Kazakhstan 1999 – first trades with the listed corporate bonds 1999 – first trades with the municipal bonds (since 2005 the issuance of these bonds is prohibited) 1999 – launching of the direct repo market 2001 – first trades with the supranational (IFO) bonds 2001 – launching of the automatic repo market (the most massive and active sector of the KASE market) 2002 – first trades with the promissory notes YOUNG AND SINGLE … (4) 2003 – first trades with foreign T-bills (Russia 2028 & Russia 2030 ) 2006 – first trades with foreign corporate bonds (JP Morgan and Merrill Lynch) 2006 – IPO of KazMunayGas Exploration–Production shares with the use of KASE settlement system 2006 – secondary distribution of KAZAKHMYS PLC (UK) shares with the use of KASE settlement system IMPRESSIVE DYNAMICS … 250 Other Repo 200 150 Corporate securities 169.3 Public securities USD bln Derivatives Currencies 100 50 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 IMPRESSIVE DYNAMICS … (2) 250 250 220.5% 200 200 150 150 KASE, USD bln % to GDP 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 0 1997 0 1996 50 1995 50 1994 100 1993 100 GDP, USD bln UNIVERSAL EXCHANGE … STF RFCA, 386.6 USD mil (0.2%) Currencies, 59,215.4 USD mil 28,2% 205,092.1 51,5% USD mil 3,6% 3,0% Autorepo with public securities, 108,253.8 USD mil 4,8% 8,2% Direct repo with public securities, 1,057.4 USD mil (0.5%) Corporate securities, 7,629.2 USD mil Public securities, 6,392.7 USD mil Direct repo with corporate securities, 10,070.6 USD mil Autorepo with corporate securities, 17,237.5 USD mil In total, repo (money) market takes 65.1% of general KASE turnover UNIVERSAL EXCHANGE … (2) KASE serves the markets of: direct and automatic repo with public and corporate securities foreign currencies (US dollar, euro, russian rouble) public securities of Kazakhstan issued by the National Bank, municipalities and Ministry of Finance (including international bonds of Kazakhstan) supranational bonds and foreign T-bills promissory notes equities corporate bonds … VARIETY OF CORPORATE BONDS "regular" domestic bonds (nominated in tenge or foreign currencies, with discount or coupon, with fixed or floating coupon) international bonds of Kazakhstan issuers agency bonds (with the tax regime equal to the tax regime of T-bills) infrastructural bonds (secured by the government guarantee) bonds of foreign issuers (previously registered outside Kazakhstan) soon: bonds of foreign issuers (registered in Kazakhstan) DOMINATION OF REPO AND FOREX MARKETS KASE repo market is specially designed for domestic purposes – to satisfy the needs of local pension funds and banks in shortterm money borrowings and lendings. KASE foreign currencies market – the basic trading site for the National Bank of Kazakhstan to regulate the exchange rate of tenge. KZT/USD: the KASE exchange rate today = official exchange rate tomorrow. LISTED COMPANIES (by categories) Equities Corporate bonds 31 Category "A" Category "B" 31 Category "A" Category "B" 32 27 62 61 20 7 9 13 9 8 8 1999 2000 2001 13 12 2002 20 27 30 38 34 39 30 1 2003 2004 2005 2006 2007 1999 10 20 1 2 2000 2001 6 2002 11 2003 39 49 6 7 2004 2005 17 2006 24 2007 LISTED COMPANIES (in total) TOTAL Equities Corporate bonds 70 68 62 54 84 40 78 17 17 21 25 45 45 114 120 56 68 36 49 22 1 11 1999 2000 17 2001 2002 79 94 2003 2004 2005 2006 2007 1999 23 32 2000 2001 2002 2003 2004 2005 2006 2007 MARKET CAPITALIZATION (USD bln) 16 70 Shares Corporate bonds 14 60 12 50 10 40 8 30 6 20 4 10 2 0 0 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 LISTED COMPANIES (by structure) Equities Corporate bonds 100% 90% Energy/power engineering Finance 70% Telecommunication services Raw materials sector 60% Industry 50% Main consumer sector 80% 40% Public sector 30% Information technology 20% Health protection 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2000 2001 2002 2003 2004 2005 2006 2007 Discretionary consumer sector "PURE" CORPORATE SECURITIES MARKET 8,0 7,0 6,0 5,0 Turnover, USD bln 9,0 4,0 3,0 Equities 2,0 Corporate bonds 1,0 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total KASE turnover for 8 months of 2007 with the equities – 5,384.9 USD mil, with the corporate bonds – 2,630.9 USD mil. "PURE" CORPORATE SECURITIES MARKET (2) 140 120 100 80 Daily turnover, USD mil 160 Equities Corporate bonds 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 In 2007 average daily KASE turnover with the equities – 32.2 USD mil, with the corporate bonds – 15.1 USD mil. "PURE" CORPORATE SECURITIES MARKET (3) The main problems are: • lack of free-float equities (the heritage of case-by-case privatization) • conservative policy of main domestic investors ("buy bonds and hold till maturity") Nevertheless .. CHAMPION GROWTH (in 2005–2007) 3500 KASE_Shares 3000 2,808 2,876 (12.02.07) (17.07.07) 2,394 (19.04.06) 2500 2,387 (20.08.07) 2000 1500 1000 216 (05.01.05) 500 01.07.07 01.04.07 01.01.07 01.10.06 01.07.06 01.04.06 01.01.06 01.10.05 01.07.05 01.04.05 01.01.05 0 Index KASE_Shares demonstrated the rapid growth: 11.1 times (for the period Jan.05, 2005 – Apr.19, 2006) and 1.2 times (for the period Apr.19, 2006 – Feb.12, 2007), due to the appearance of new investors’ class – mutual funds and individual persons. INVESTOR BASE … 180 120 160 Unit investment funds assets 140 Insurance assets 120 Pension assets 100 Banks assets 80 60 Total assets, % to GDP GDP 100 80 60 40 40 20 20 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Institutional investors assets at the end of 2006 reached 78.5 bln USD, 89.0% of them are banks assets, 9.1% – pension assets Principal indicator is growth of unit investment funds assets (at the end of 2006 – 383 mln USD) INVESTOR BASE (2) 12 Consequences of excess investor base is the real “zero" yield of debt instruments for investors 10 8 6 4 Inflation 2 Yield of "domestic" listing bonds of "А" category 0 2000 2001 2002 2003 2004 2005 2006 ADVANCED TECHNOLOGIES KASE uses it’s own trading platform: on-screen based electronic "Server – Client" system remote access electronic signature and electronic documents circulation traffic encryption on-line data saving Central Depository is the KASE subsidiary: DVP T+0 settlement basis IN THE FUTURE … • Waiting for the IPO of the largest Kazakhstan banks and producers (according to the Securities Law, at least 20% of the local shares being placed must be suggested at the domestic market for purchase) • Administrating the Special trading site of the Almaty Regional Financial Center (set-up to attract foreign issuers and investors) • Welcoming the new listing companies • Waiting for the IFOs to place their bonds in Kazakhstan • Ready to introduce T+n settlement basis for the foreign operators (only for eqities) CONTACT US … Internet: www.kase.kz e-mail: [email protected] phone: (+7 327) 237 53 00, 272 98 98, 237 53 11, 272 06 00 fax: (+7 327) 296 64 02, 272 09 25 address: 291/3, Dostyk av., Almaty, Kazakhstan