Kazakhstan Financial Markets

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KAZAKHSTAN SECTOR RESEARCH

Kazakhstan Financial Markets

Executive Summary

May 1998

Table of Contents

Latest Kazakhstan Weekly News

The banking sector in Kazakhstan is represented by the National Bank of Kazakhstan and second-tier commercial banks. Macroeconomic stabilisation, which favourably distinguishes Kazakhstan from other CIS countries is mainly due to the tight monetary policy implemented by the National Bank of Kazakhstan. Commercial banks form an important element of the financial system. Recently, commercial banks were allowed to operate in the securities market. So far, the financial system in Kazakhstan has a strong bias towards models of universal banking.

The securities market is in the early stage of development. However, to date, the major elements of the securities market infrastructure are in place. Professional and strong National Securities Commission, independent from the Government, created a proper regulatory framework and introduced enforcement mechanisms. Self regulatory stock exchanges, a central depository, as well as registrars, custodians, and broker-dealer community form the institutional structure of the local securities market.

The major purpose of this report is to give a brief overview of the major elements of the financial markets. We have highlighted the key components of the banking sector and their role in the financing of economic development of the country. A special section is devoted to the securities markets and its major elements. We have also introduced you to the emerging institutions on the capital markets – pension funds and insurance companies. The research team of Kazkommerts Securities plans to issue detailed reports on pension funds for the industry and insurance sectors. If you require additional information on these or other topics, please contact us at the address indicated at the end of the brochure.

Kazakhstan's Financial Sector

Kazakhstan's financial sector is one of the most rapidly developing sectors of economy. Having curbed the crisis caused by the collapse of the Soviet Union, Kazakhstan is presently rather secure in its independent development and sovereign standing. The financial infrastructure provides for a full range of financial services for encouraging foreign investments.

The year 1997 was crucial for the republic in many respects. By the end of the year , the inflation rate was down from 28.7% to 11.2% ; the refinancing rate of the NBK from ? 35% to 18.5%; the average interest rate in the interbank market from 38% to 11.8%; average annualised yield of government securities from 25.9% to 13%. After a negative GDP growth rate in 1995 and a moderate 0.5% increase in 1996, its growth of 2% in 1997 shows a vivid tendency towards improvement. GDP is expected to further increase by 3% in 1998. All this alongside overall stabilisation of the financial environment and consistency of reforms under way gives us the belief that Kazakhstan is on its way to international economic competition.

It is quite natural that in 1996 Kazakhstan was the first country in Central Asia to receive credit ratings from international rating agencies. Presently, the republic has a 'BB-' rating from Standard & Poor's, a 'BA3' rating from Moody's and a 'BB' from IBCA.

This report has been prepared by Kazkommerts Securities and provided solely for information purposes to recipients only. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. This information does not constitute an offer to buy or sell securities. Kazkommerts Securities or its affiliated persons may be buying, selling or holding long or short positions, acting as investment bankers, be represented on the Board of the issuers in securities mentioned herein. This report is not intended for the use of private investors. Investment in Kazakhstan markets is an extremely risky activity and many persons, physical and legal, may be completely or partially restricted from dealing in the Kazakhstan securities markets.

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