CLEAR INDICATORS

Kazakhstan 2017 | FINANCE | INTERVIEW

TBY talks to Alina Aldambergen, Chairman of the Management Board of the Kazakhstan Stock Exchange (KASE), on the launch of commercial bonds, upgrading the image the exchange, and the strategy for achieving that.

Alina Aldambergen
BIOGRAPHY
Before her current position as Chairman of the Management Board of Kazakhstan Stock Exchange JSC, Alina Aldambergen held management positions as Deputy Chairman of Managing Board of National Management Holding Baiterek JSC between 2013 and February 2016 and acted as Representative of Baiterek National Managing Holding JSC in Development Bank of Kazakhstan JSC, DAMU Entrepreneurship Development Fund JSC, House Construction Savings Bank of Kazakhstan JSC, and Kazakhstan Mortgage Company JSC. She graduated from Kazakh State Academy of Management (1995) with a bachelor’s degree in economics, specializing in finance and credit, and holds an MBA from the University of Rochester (1997).

What is the reason behind KASE's launch of a new section on commercial bonds, and how will this affect trading volumes?

Being sensitive to our clients' needs and the high interest rate environment for our borrowers, KASE decided to launch a new instrument. We have seen plenty of short-term liquidity and if a company issues bonds with a duration of up to one year, we expect the rates of those bonds to be lower than for short-term bank loans, while attracting for longer periods is not attractive. Therefore, we offered the mix of short term and low rate commercial bonds that allow a company to easily manage its liquidity position. It is being issued by a company already listed on the KASE, which has a proven track record, stable earnings, and is capable of servicing short-term bonds. Furthermore we developed simplified procedures to register commercial bonds and listing of short-term bonds approved by the National Bank and KASE. This, coupled with reduced listing fees, put the product in growing demand from domestic companies. For example, we have two issues already listed and placed and one is to come by the end of this year. And we expect 10 more issues in 2018.

What are the key aspects of your development strategy?

Our recently approved development strategy for 2016-2018 focuses mainly on attracting new issuers, expanding the investor base, deepening the FX market through an increasing number of participants besides local banks, the improvement of risk management and clearing services, and IT upgrades. Our priority is to become a viable alternative to banks' funding for corporates and enhance economic growth through diversification of their funding; therefore, the high-priority clients for the exchange are growing small and mid-sized companies that are already producing goods and have perspectives to grow further. Over the last few years, the major source of funding for companies has been banking loans in dollars, which, given devaluation, led to significant losses. We offer the alternative financing on the stock market, promoting IPO. As per our estimates, more than 350 companies meet the criteria for potential mid-sized company issuer. One of the development aspects we see is a client-oriented approach of our business; therefore, we decided to emphasize the work with market participants and the exchange members. Furthermore, we have been working on KASE rebranding that reflects our new strategy and upgrade of KASE's website that is expected to fully launch in 2017.

What are your expectations for 2017 and the next few years?

We are still at the stage where interest rates are quite high for business to borrow and therefore lending activity is restricted. There is still uncertainty in terms of how the economy will perform, because we have near-zero growth so far and the forecasted growth for this year is 0.5%. The government is taking measures to support economic growth by expanding state sector expenses through the government program Nurly Zhol, which supports the development of medium-sized business in priority sectors of economy, investment in infrastructure, building affordable housing, and so on. Certain industries benefited such as agriculture, construction, and transportation. Oil prices have been slowing and oil industry output has been contracting. The other effect is that because of devaluation the average household income fell in real value and the population reduced spending. The National Bank is targeting annual inflation in the range of 6-8%. As per 11 months of 2016 inflation is already 7.5%. In 2017, target annual inflation is to remain in the range of 6-8%. Base rate was reduced to 12% from 12.5% with a band of +/-1%. This was affected by a fall in inflation month-to-month in line with the forecast as well as by continuing conversion of bank deposits to tenge and decreasing devaluation expectations among the population. As per estimates, nominal GDP will grow to KZT63.6 trillion from KZT48.4 trillion. GDP per capita will be USD7,500 in 2017 with a potential to rise to USD10,000 in 2021.