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INTRODUCING KAZAKHSTAN STOCK EXCHANGE INC. (KASE) Relevant as of November 1, 2007 COEVAL WITH TENGE … KASE was established on November 17, 1993 under the name of Kazakh Interbank Currency Exchange – two days after Tenge (the new national currency of Kazakhstan) was introduced on November 15, 1993. Nowadays, November 15 is celebrated as the official "Day of Tenge". "Old" tenge (1993–2006) "New" tenge (since 2006) YOUNG AND SINGLE … KASE is a commercial joint-stock company with 70 shareholders (as at October 1, 2007). The National Bank of the Republic of Kazakhstan is the largest shareholder. Other shareholders include: banks, brokerage firms, asset management companies, pension funds and other professional financial institutions. Voting method: one share – one vote. YOUNG AND SINGLE … (2) Today KASE is the single universal financial exchange in Kazakhstan with brief but bright history: 1993 – first trades with foreign currency (US dollars) 1995 – first trades with T-bills 1996 – first trades with derivatives (KZT/USD exchange rate futures) 1997 – first trades with listed equities 1997 – first trades with government stacks of shares 1997 – first trades with non-listed corporate securities 1998 – launching of "nego" deals system on KASE (instead of over-thecounter securities market ) YOUNG AND SINGLE … (3) 1998 – first trades with eurobonds of Kazakhstan 1999 – first trades with listed corporate bonds 1999 – first trades with municipal bonds (since 2005 the issuance of these bonds is prohibited) 1999 – launching of the "nego" repo market 2001 – first trades with bonds of international financial organizations (IFO) 2001 – launching of "automatic" repo market (the most massive and active sector of the KASE market) 2002 – first trades with the promissory notes 2003 – first trades with foreign T-bills (Russia 2028 & Russia 2030 ) YOUNG AND SINGLE … (4) 2006 – first trades with foreign corporate bonds (JP Morgan and Merrill Lynch) 2006 – IPO of KazMunayGas Exploration and Production shares with the use of KASE settlement system 2006 – secondary distribution of KAZAKHMYS PLC (UK) shares with the use of KASE settlement system 2007 – special trading floor of the Regional Financial Center of Almaty city was founded on the base of KASE (founded to attract foreign issuers and investors) 2007 – launch of the new index on the share market – KASE Index, which continued the number series of KASE_Shares Index IMPRESSIVE DYNAMICS … 300 Other 265.5 USD bn Repo 250 Corporate securities 200 Public securities 169.3 Derivatives USD bn Currencies 150 100 50 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 10 m 2007 IMPRESSIVE DYNAMICS … (2) 300 250 220.5% KASE, USD bn 250 200 % to GDP 200 GDP, USD bn 150 150 100 100 50 50 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 10 m 2007 UNIVERSAL EXCHANGE … STF RFCA, 496.5 USD m (0.2%) Currencies, 71,942.6 USD m 27,1% 10 m 2007: 265,543.8 53,0% USD m Autorepo with public securities, 140,627.0 USD m 3,5% 2,8% 4,7% 8,4% Direct repo with public securities, 1,132.7 USD m (0.4%) Corporate securities, 9,158.4 USD m Public securities, 7,351.2 USD m Direct repo with corporate securities, 12,492.0 USD m Autorepo with corporate securities, 22,343.6 USD m In total, repo (money) market takes 65.2% of general KASE turnover UNIVERSAL EXCHANGE … (2) KASE serves the markets of: "nego" 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) IFO 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 Kazakhstani 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 borrowing and lending. KASE foreign currencies market – the basic trading site for the National Bank of the Republic 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 10 м 31 Category "A" Category "B" Corporate bonds 10 м 31 Category "A" Category "B" 32 27 61 61 20 7 9 13 9 8 8 1999 2000 2001 13 12 2002 20 27 30 38 40 30 1 2003 2004 2005 2006 2007 1999 10 20 1 2 2000 2001 6 2002 34 39 11 2003 49 6 7 2004 2005 17 2006 25 2007 LISTED COMPANIES (in total) Equities 10 м Corporate bonds TOTAL 10 м 70 68 62 54 86 40 114 78 17 17 21 25 45 45 56 68 11 1999 2000 22 2001 17 2002 94 49 36 1 79 122 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 100% 10 м Corporate bonds 10 м 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 Global Industry Classification Standard (GICS) of S&P is used "PURE" CORPORATE SECURITIES MARKET 10,0 8,0 Turnover, USD bn 12,0 6,0 4,0 2,0 Equities Corporate bonds 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 10 m 2007 Total KASE turnover for 10 months of 2007 with the equities – 6,023.1 USD m, with the corporate bonds – 3,631.8 USD m. "PURE" CORPORATE SECURITIES MARKET (2) 140 120 100 80 Daily turnover, USD m 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 – 28.7 USD m, with the corporate bonds – 16.6 USD m. "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 Index 3000 2,808 2,876 (12.02.07) (17.07.07) 2,394 (19.04.06) 2500 2,387 (20.08.07) 2000 1500 216 1000 (05.01.05) 500 01.10.2007 01.07.2007 01.04.2007 01.01.2007 01.10.2006 01.07.2006 01.04.2006 01.01.2006 01.10.2005 01.07.2005 01.04.2005 01.01.2005 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 Total assets, % to GDP 60 GDP 100 80 60 40 40 20 20 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 9m 2007 Institutional investors assets at the end of 2006 reached 78.5 bn 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 m 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 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 IFOs to place their bonds in Kazakhstan • Ready to introduce T+n settlement basis for the foreign operators (only for eqities) • • • • • Launching currency swap market Listing unit funds units Holding active marketing campaigns Modifying trading system Launching new version of KASE web-site CONTACT US … Internet: www.kase.kz e-mail: [email protected] phone: (+7 727) 237 53 00, 272 98 98, 237 53 11, 272 06 00 fax: (+7 727) 296 64 02, 272 09 25 address: 291/3a, Dostyk av., Almaty, Kazakhstan