Although the Kazakhstan securities market is the most developed in Central
Asia, its development has been slow compared to the country’s banking sector.
It now faces an uphill struggle due to intense competition from foreign capital
markets for Kazakhstan’s attractive pipeline of IPOs and eurobonds.
Kazakhstan’s largest companies typically choose to list their shares or global
depositary receipts and issue eurobonds in London to gain access to high-quality
international investors.
Meanwhile, smaller Kazakh companies have been deterred from listing and
raising finance locally because of the high listing conditions set by the only — until this year — local stock exchange, the Kazakhstan Stock Exchange, and a lack
of liquidity (there is, effectively, only one investor in Kazakhstan: the Unified
Pension Fund).
Kazakh authorities evidently realized the importance of developing the local
capital market and that privatization of state assets can give Kazakhstan
a real opportunity to bolster the competitiveness and efficiency of some of
its most significant companies.
It is hoped that the creation of the Astana International Financial Centre
(AIFC), which is modeled on the Dubai International Financial Centre
and officially launched on the 5th July this year, and the ongoing global
privatization of state-owned companies including by way of IPOs, will help in
achieving these challenging objectives.
Multiple IPOs, particularly those of national companies Kazakhtelekom,
Kazatomprom and AirAstana, are scheduled for the next few years on the
stock exchange of the AIFC, the Astana International Exchange (AIX). Placement
of a debut sovereign Sukuk facility is also expected to take place on the AIX’s
platform by the end of 2018.
In 2009, Kazakhstan was the first country in the Commonwealth of
Independent States and Central Asia to introduce Islamic banking and Islamic
securities. In 2012, JSC Development Bank of Kazakhstan issued Islamic
securities in the form of Sukuk Murabahah. One of the core pillars of
the AIFC is Islamic finance, as it aims to become an Islamic finance hub not
only for Kazakhstan, but for the whole of Central Asia, the Eurasian Economic
Union, the Caucasus, West China and Mongolia.
There is no doubt, therefore, that Kazakh privatization, the issuance of
Islamic bonds and proposed IPOs on the AIX would attract capital not only from
western and Chinese investors, but also from Muslim markets in the Middle East
and Southeast Asia.
Against the backdrop of fluctuating commodity prices, global trade wars
and a continued dependence on natural resources, privatization and liberalization would come as a breath of fresh air for Kazakhstan.
Shaimerden Chikanayev is a partner at Grata Law Firm. He can be contacted at