Tag Archives: Kazakhstan

Kazakhstan wracks up $4b deficit in 2015

NOV. 11 2015 (The Conway Bulletin) – Kazakhstan wracked up a $4b current account deficit in the first nine months of 2015, the Central Bank said, a direct consequence of the fall in the price of oil and gas — its main exports.

This deficit compares with a $6b surplus in the same period last year and shows the impact of the collapse in energy and commodities prices.

The volume of Kazakhstan’s oil and commodities exports was the same in the first nine months of this year compared to last year but they dropped, heavily, in value, earning Kazakhstan far less cash.

The Central Bank data will intensify pressure on the Kazakh government to diversify its economy away from oil and gas.

And Kazakhstan’s monetary policy also played a role in current account deficit too.

Until the Central Bank abandoned its US dollar peg in August, after stubbornly refusing to devalue alongside the Russian rouble, Kazakh exports to Russia were just too expensive. And this hurt Kazakh industry. Russia is one of its main export market.

And this showed up in Kazakhstan’s trade balance. Although still positive, it shrank by almost two thirds. In Jan-Sept 2015, Kazakhstan’s exports exceeded imports by $10.7b, a drop from $30.6b during the same period in 2014.

These figures are a stark reminder of the impact of the regional economic malaise on Kazakhstan. The 40% devaluation of the tenge after the Central Bank ditched its US dollar peg will help Kazakh exporters but the government really needs an increase in oil and gas prices to restore its revenues.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

LiveJournal comes back to Kazakhstan

NOV. 11 2015 (The Conway Bulletin) – The social networking site LiveJournal will be available again in Kazakhstan, the government said. LiveJournal, which is popular in the former Soviet Union, was banned in August 2011 for “propagating terrorism and extremism.” Kazakhstan has been criticised for cracking down on free speech.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakhstan to give state workers pay rise, stoking inflation

NOV. 10 2015 (The Conway Bulletin) – State workers in Kazakhstan will receive pay rises next year of 7-29% to offset the devaluation of the tenge, media reported quoting social development minister Tamara Duysenova. The figures show just how pronounced the anticipated devaluation-linked inflation is likely to be.

The tenge has fallen by 40% in value since its US dollar peg was ditched in August and analysts have warned of a corresponding surge in inflation.

This has already begun to seep through. The Central Bank said that annualised inflation jumped to 9.2% in October, double the rate in September. The announcement on the size of the state pay rises, though, suggests more price rises are likely.

Most of the state employees that Ms Duysenova said would receive a pay rise were doctors, nurses and teachers.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Business comment: A dangerous ripple effect

NOV. 13 2015 (The Conway Bulletin) — The whole post-Soviet region has faced a steep economic downturn over the past year, leading to regional trade imbalances that have travelled across borders.

Initially, the fall in the value of the Russian rouble hit the Kazakh tenge. Despite a 20% devaluation in Feb. 2014, the tenge’s peg to the US dollar made it increasingly expensive against the rouble. When the rouble started to lose double- digit value against the US dollar, the tenge held its US dollar trading point, making it increasingly expensive. For the first eight months of this year, cheap Russia goods flooded Kazakhstan.

Eventually, in August, the Kazakh Central Bank effectively ordered another devaluation by ditching a US dollar peg. The graph below illustrates this clearly. It shows the rouble/$1 rate and the rouble/tenge rate matching each other until August. The value of the rouble, according to the graph, halves against the US dollar and the tenge.

In August, though, there is a sharp correction in the trading rate of the rouble/tenge. It diverges, violently almost, with the rouble/$1rate. The graph shows that the tenge is still stronger than the rouble compared to June 2014, but the differential is reduced.

And this is where the ripple effect carried through to neighbouring Kyrgyzstan.

Thee blue line on the graph represents the rouble/som rate. It, broadly, matches the peaks and troughs of the rouble/$1 rate, suggesting an informal peg to the US dollar.

The Kyrgyz Central Bank, though, has clearly tried to devalue the som independently too, as the rouble/som rate diverges slightly from the rouble/$1 rate.

The yellow line shows the tenge/som rate, and clearly depicts the change in relative values of the two neighbours’ currencies. The som has been weaker against the tenge for most of the year, as shown by the fairly shallow but pronounced trough. This changes after the tenge devaluation in August.

A currency domino effect, although slower than analysts had predicted, is rippling through Central Asia. The rouble is an optimal benchmark to observe this phenomenon.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Stock market: GHG, Nostrum, KAZ Minerals

NOV. 10 2015 (The Conway Bulletin) — As the Bulletin reports on its front page, Georgia Healthcare Group (GHG) listed on the London Stock Exchange with an initial share price of 170p on Nov. 9. The company listed 29% of its shares, valuing the company around £218m ($331m). By Friday its shares had dropped to 181p.

Oil and commodities companies lost ground on the London stock market after Brent and copper prices fell by 6% and 4.5% this week.

Linked to this fall in the price of Brent crude futures, Kazakhstan-focused Nostrum Oil & Gas shares were down 16% closing at 367.5p. Nostrum recorded an 8% fall on Thursday, placing its shares among the worst performers on the FTSE 250.

Cooper producer KAZ Minerals, formerly known as Kazakhmys, faired worse. Its shares fell by 20% over the week, closing at 80p.

Tethys Petroleum shares jumped by 53% on Monday following Olisol’s letter of intent to acquire its stakes, but finished the week down to 4.25p.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakhstan helps mortgage holders

NOV. 9 2015 (The Conway Bulletin) – Under a scheme designed to help people in Kazakhstan who hold mortgages in US dollars cope with the devaluation of the Kazakh tenge, the Central Bank said that it had refinanced 3,500 mortgages by Nov. 1. The programme will run until March or April 2016.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Tethys does deal with Kazakh investment group Olisol

NOV. 9 2015 (The Conway Bulletin) — Canadian oil and gas company Tethys Petroleum said it has entered into a non-binding agreement worth around $34m with Kazakhstan-based Olisol Investments, allowing it to refinance its debt and inject cash into exploration projects.

Tethys operates oil and gas projects in Kazakhstan, Tajikistan and Georgia.

Olisol upped its previous offer per share from 0.16 to 0.17 Canadian dollars, for a total of 25.5m Canadian dollars. In addition, Olisol will lend Tethys $15m. Last month, an Olisol statement said that it had worked with Tethys since 2009 and that it wanted to created a fully integrated oil and gas company in Kazakhstan.

Tethys, which was close to reaching a deal with London-listed Nostrum Oil & Gas earlier in September and has also attracted interest from AGR Energy, a company owned by the Kazakh Assaubayev family, said it was happy with the deal.

“We are pleased to have reached conditional agreement with Olisol on a potentially transformational refinancing,” the company statement quoted Tethy’s CEO, John Bell, as saying.

Analysts, though, were cautious on the real value of the deal.

“There is a lot of movement around Tethys, with offers being made and later being pulled. I would remain cautious of the whole situation, until a deal is signed,” Stephane Foucaud, managing director at First- Energy Capital investment firm, told the Bulletin.

“It is still unclear what kind of securities will Olisol use as a warranty for its interim financing. In these deals debt can often be used as a weapon.”

Perhaps most importantly for Tethys shareholders is that the deal spares it from working with AGR Energy and the Assaubayev family which has a mixed reputation in Kazakh business circles.

Tethys’ share price surged in London and Toronto on the day of the announcement, although it lost ground later.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakh President’s daughter makes online profit

NOV. 11 2015 (The Conway Bulletin) – An investigation by a Kazakh website showed a company linked to the youngest daughter of President Nursultan Nazarbayev, Aliya Nazarbayeva, is charging 2% for online payments through Kazakhtelecom.

In June, Kazakhtelecom, Kazakhstan’s largest provider of internet services, imposed a 2% charge when customers paid for its services online.

An investigation by the informburo.kz website showed that the service company Instant Payments had become the intermediary for these transactions and was the ultimate beneficiary of the 2% fee. Ms Nazarbayeva is the founder and owner of Instant Payments, informburo.kz reported. Within a day, the report had disappeared from the informburo.kz website but not before it had triggered public anger.

Typical of this anger was a comment from Vladimir P on alau.kz. “We are living a crisis, but everything goes in their large, immense pockets, not to the people,” he wrote.

Neither Ms Nazarbayeva nor Kazakhtelecom have commented. There is no suggestion of any wrong-doing.

ENDS

(News report from Issue No. 256, published on Nov. 13 2015)

Kazakh president seals deals in London

NOV. 3/4 2015 (The Conway Bulletin) – Kazakhstan’s President Nursultan Nazarbayev flew to Britain and France to sign a series of headline grabbing deals and pose for useful photo-ops.

In London, Mr Nazarbayev met with PM David Cameron and the Queen. The two sides signed 40 deals for £3b ($4.6b).

Importantly, Mr Nazarbayev’s eldest daughter Dariga, a deputy PM, accompanied him on the trip and was part of the official photo with the Queen. In Soviet and post-Soviet iconography, featuring in official photographs sends a strong signal and being photographed next to her father at an official engagement with the Queen will have boosted any presidential ambitions that Ms Nazarbayeva harbours.

In Paris, Mr Nazarbayev met with President Françoise Hollande and signed another set of deals worth over $5b, according to state media in Kazakhstan.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)

Air Liquide and Kazakh refineries cooperate

NOV. 5 2015 (The Conway Bulletin) — French company Air Liquide will form a joint venture with Kazakhstan’s state-owned Kazmunaigas to increase production of industrial gases at the country’s refineries. The agreement, signed during President Nursultan Nazarbayev’s visit to France, will improve the performance of Kazakhstan’s three refineries at Atyrau, Pavlodar and Shymkent.

ENDS

(News report from Issue No. 255, published on Nov. 6 2015)