POSITIVE SIGNS

Kazakhstan 2016 | FINANCE | REVIEW: CAPITAL MARKETS

The total volume of value traded on the Kazakhstan Stock Exchange grew by nearly 65% in 2015, marking a strong expansion of liquidity in the country's capital markets.

At the center of Kazakhstan's capital markets is the Kazakhstan Stock Exchange, a privatized joint-stock commercial entity with 46 shareholders at the beginning of 2016, a 12.77% decrease from the 53 shareholders listed at the beginning of 2015. The National Bank of Kazakhstan holds a 50.1% stake in the Kazakhstan Stock Exchange, which was established as the Kazakh Interbank Currency Exchange on November 17, 1993, just less than two years after the country declared its independence from the former Union of Soviet Socialist Republics.

As of the end of 2015, the total market capitalization of the Kazakhstan Stock Exchange was $36.4 billion. The market cap of corporate fixed-interest securities listed on the Exchange fell by 26.5% from $36.6 billion at the beginning of 2015 to an end-2015 level of $26.9 billion, representing a 73.9% share of the Exchange's total end-2015 market cap. Public-sector debt on the government securities market stood at $16.4 billion through the end of 2015, including National Bank bonds with a 2016 disbursement and Eurobonds of the Republic of Kazakhstan set to disburse repayments in both 2024 and 2044. End-2015 equity value of the Kazakhstan Stock Exchange was $28.5 million, including a 17.05% reduction in paid-up charter capital from $12.9 in 2014 to $10.7 million at end-2015. Of the 5,000,000 shares authorized in the Exchange's articles of incorporation 942,013 shares were outstanding, with a share book value of $31.1, an 11.07% increase from the 2015 share book value of $28.

Total assets of the Kazakhstan Stock Exchange at end-2015 were $39.4 million, a 25.88% YoY increase from the $31.3 million recorded at end-2014, while net profit in 2015 was $4.9 million, a 32.43% YoY increase from the $3.7 million net profit earned in 2014. Return on assets (ROA) and return on equity (ROE) both improved through 2015, increasing from 11.8% to 12.4% and from 12.6% to 16.8%, respectively. The volume of trades made on the Kazakhstan Stock Exchange in 2015 represented a total value of $429.6 billion, a massive 64.98% increase from the $260.4 billion traded in 2014. The average number of daily deals on the Exchange was 542, nearly half of which were in the foreign currency market. These amounted to $1.754 billion in daily volume at an average volume of $3.1 million per trade.

Foreign currency trades represented by far the largest segment of trading on the Kazakhstan Stock Exchange in 2015 at $312.81 billion, followed by repo transactions at $104.2 billion. Trading of corporate bonds amounted to $5.613 billion in 2015, while trading of corporate shares totaled $4.737 billion in 2015. Government securities traded at a total volume of $2.257 billion in 2015, and $500,000 of derivative instruments were traded during 2015.

While corporate bonds accounted for just 0.4% of trading in 2014, that figure grew to 1.3% in 2015. Government securities grew to from 0.1% in 2014 to 0.5% in 2015, while repo on corporate securities and government securities grew from 1% and 24.1% in 2014, respectively, to 1.1% and 24.2% in 2015, respectively. The percentage of trading accounted for by currency and shares of publicly listed companies dropped from 72.3% and 2.2% in 2014, respectively, to 72.8% and 0.1% in 2015, respectively.

In terms of the market capitalization of companies' publicly listed shares by sector, energy was by far the largest segment on the Kazakhstan Stock Exchange with a 78.1% share of the total market cap, more than doubling from just a 38.7% share in 2014. Despite the market cap of its shares traded falling from 28.6% in 2014 to 11.7% in 2015, the financial services industry was still the second largest sector by volume on the Exchange. The shares traded of listed companies in the materials sector fell from a 12.3% share of total market cap in 2014 to 3.7% in 2015, while the share of market cap for providers of telecommunication services fell from 10.2% in 2014 to 2.9% in 2015. The share of market cap for listed companies in the industrial sector fell from 6.8% in 2014 to 2.5% in 2015. Consumer staples companies' shares accounted for 0.9% of the total market cap for shares on the Exchange in 2015, down from 2.7% in 2014, while the discretionary consumer goods sector represented a 0.2% share of the market cap of company shares in 2015, halving the sector's share from the 0.4% registered in 2014. Healthcare shares' market cap represented less than 0.1% in 2015, down from 0.2% in 2014.

Bonds issued by the energy sector represented 34.4% of the total market cap for bonds on the Kazakhstan Stock exchange in 2015, up from a 33.70% share in 2014. The energy sector trailed only the financial services sector, where the share of market cap of corporate bonds fell from 50.70% in 2014 to 46.80% in 2015. Bonds issued by the discretionary consumer goods sector represented 8.40% of the market cap of bonds traded on the Exchange, up from a 5.80% share in 2014, while the industrial sector accounted for 8.30% of the share of the market cap of bonds listed on the exchange in 2015, up from its 5.70% share of the market cap for bonds in 2014. Corporate bonds issued by providers of municipal services represented 0.90% of the market cap for bonds, up from the 0.80% share it held in 2014. Bonds from the consumer staples sector accounted for 0.80% in 2015, down from 1.30% in 2014, and bonds from the materials industry held a 0.10% share of total bond market cap in 2015, down from its 1.70% share in 2014.