OCT. 7 2015 (The Conway Bulletin) – Human Rights activists in Kazakhstan have asked President Nursultan Nazarbayev to veto a bill being reviewed by the Senate which will make it harder for domestic NGOs to receive funding from overseas. Campaigners said the bill is a form of state control over NGOs.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 9 2015 (The Conway Bulletin) — The biggest mover in the stock markets for Central Asia and the South Caucasus was London-listed KAZ Minerals, which gained a staggering 65% since the beginning of October at 145p on Friday. Its performance was in line with most commodity producers which were hit by the Glencore slump last week.
Kazakhstan-focused Nostrum Oil & Gas was stable this week at around 524 pence, after rebounding from a sharp drop last week. Its failed takeover offer for Tethys Petroleum affected its performance in the market.
Polyus Gold continued its roller- coaster to end the week at 198 pence. Polyus has shown a volatility of +/- 3% over the past three weeks.
In local markets, KEGOC, Kazakhstan’s state-owned electricity company became one of the strongest players in KASE, gaining over 25% in the past three weeks. However, because its stocks are denominated in tenge, the value of its assets has not fared as well as it seems. Speculative moves behind the multi-million dollar transactions of the past weeks have turned KEGOC into an appealing investment in a market marred with worsening assets.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) — Scotland-based Wood Group won a service contract to supply an automated system for crude storage facilities at the Tengiz oil field in Western Kazakhstan. It said the automated system would increase storage capacity. Bechtel, a US-based engineering company, signed the multimillion dollar deal with Wood Group.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015, ALMATY (The Conway Bulletin) — A Kazakh government bail-out for hundreds of thousands of savers who hold tenge denominated deposits hit by a currency devaluation in August could cost the state around $420m, according to the Bulletin’s calculations.
The bail-out adds to the lengthening bill that the Kazakh state is having to foot to weather a worsening economic storm that has hit the Central Asia and South Caucasus region.
It has spent billions of dollars propping up its currency and also said that it will give handouts and tax breaks to key industries heavily effected by the economic downturn such as car-makers and smaller oil producers.
And in an effort to shore up support immediately after the devaluation on Aug. 20, President Nursultan Nazarbayev said savers would be compensated for losses incurred when the Central Bank ditched the tenge’s peg to the US dollar and allowed it to drop heavily.
Now, at a press conference in Almaty, Alexander Trentyev, director of the consumer protection department at the Central Bank, for the first time hinted at the bill that the government was facing.
“The compensation will cover the period August 18 2015 to September 30 2016. Over 1.7m accounts totalling around 250b tenge are eligible for the government aid,” media quoted him as saying.
The tenge is currently trading at around 275/$1, a drop of around 46% from its value of 188/$1 just before the devaluation on Aug. 20. This means that the 250b tenge in bank deposits will convert to 365b tenge and cost the government $420m in compensation. Of course, though, as analysts have said, the tenge could well drop further in value before Sept. 30.
But there is a flip-side for savers. Their accounts will be frozen for 13 months until Sept. 30 2016.
This measure appears to have been adopted to prevent customers from rushing to withdraw their savings and turning them into US dollars after they received compensation.
It will also keep a high level of tenge in the currency markets, a policy the Central Bank has said that it favours.
What the authorities are desperate to avoid during this period of economic turbulence is civil unrest. The bail-out of savers appears designed to ward this off.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 5 2015 (The Conway Bulletin) — State-owned Japan Oil, Gas and Metals National Corporation said it will explore Kazakhstan for mineral deposits. Preliminary investigations will be conducted, jointly with Kazakhstan’s state-owned company Kazgeologiya, in 2016. Japan has bought large amounts of oil from Kazakhstan this year.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) — Russian carmaker AvtoVAZ will build two new models of its Lada brand in Kazakhstan starting in 2017. AvtoVAZ said its plant in Ust-Kamenogorsk, east Kazakhstan, will receive investments for around $840m.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) — Banks in Kazakhstan and Kyrgyzstan are bracing themselves for tough times ahead. The currency crisis that has hit the region has, it feels, still a long way to run. Central Banks in both countries have pledged to help commercial banks in the short term to prevent falls in the values of the tenge and som from spiraling into panic and a run on the banks.
This is sensible.
The Kazakh Central Bank said it would compensate savings accounts in tenge that have so far lost 46% in US dollar terms after the regulator moved to a free-float policy. Across the border, in Bishkek, the Central Bank laid out new measures to help customers pay their dollar- denominated mortgages, which have become more expensive as the som lost value.
When people lose confidence in their currency, as is happening across Central Asia and the South
Caucasus, Central Banks intervene. In both countries, new policies were adopted to limit the amount of loans in foreign currencies, to ensure stability in the market.
These short-term measures, however, may have serious repercussions down the road. Bailouts can have an adverse effect on these countries’ sovereign ratings and they could, in any case, be insufficient to reverse the economic downturn.
Let’s see how these policies fair against a falling currency market.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 2-8 2015 (The Conway Bulletin) — The Kazakh tenge lost 1.5% of its value over the past week, ending at 274/$1.
Much of this perceived strength appears to lie with the Central Bank’s little secret — intervention. Despite promising never to intervene in the currency again, the Kazakh Central Bank has spent another $367.5m this week propping up its currency.
Over the border in Kyrgyzstan, the som crept briefly over 69/$1 on Oct. 6, before settling back to 68.9 in a week that saw little of the violent fluctuations of previous episodes. The Kyrgyz Central Bank also intervened in the market, selling $10.2m.
No doubt the successful and peace- ful parliamentary elections would have played well to the steady currency markets. European vote monitors were certainly impressed and that is good for Kyrgyzstan’s image.
The Georgian lari was also stable last week at 2.40. Positive economic data and a substantial stability in foreign reserves reassured lari holders.
The Tajik somoni continued its gradual devaluation against the dollar. By marginally weakening every week, the somoni has lost 2.5% of its value against the dollar over the past month.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 6 2015 (The Conway Bulletin) – The proportion of savings in Kazakhstan held in foreign currency measured 78% in August, according to the ranking.kz website, a sharp increase from a year earlier. Foreign currency deposits in August 2014 measured 60% of the total. Kazakh savers have gradually lost faith in their currency.
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(News report from Issue No. 251, published on Oct. 9 2015)
OCT. 7 2015 (The Conway Bulletin) — Analysts in Kazakhstan have revised their inflation expectations down to 7.1% this year after official data showed that the consumer price index grew by only 1% in September.
Halyk Finance researchers said the numbers are much more encouraging than what they forecasted. This should keep inflation within the Central Bank target of 6-8%. Central Bank chairman Kairat Kelimbetov said he doesn’t rule out the possibility of a further increase in interest rates, after a new rate was set at the end of last week.
The Eurasian Development Bank (EDB) said in a report that Kyrgyzstan’s economy is poised to grow by 1.8% this year. This came after PM Temir Sariyev disclosed more optimistic numbers, pointing out that in Jan.- Sept. 2015, the country’s economy grew by 6%. The EDB said it expects a marginal slowdown in economic activity in Q4 2015.
The IMF has dramatically increased its forecast for Azerbaijan’s growth in 2015, from a meagre 0.6% in April to 4% in its latest report.
The international lender also revised inflation expectations downwards from 7.9% to 5% for 2015, more good news.
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Copyright ©The Conway Bulletin — all rights reserved
(News report from Issue No. 251, published on Oct. 9 2015)
