Capital markets: Technicalities hamper Kazakhstan
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Capital markets: Technicalities hamper Kazakhstan

The prospect of progress in Azerbaijan’s equity markets throws into sharp relief the recent lack of it in those of its Caspian neighbour Kazakhstan.

Long the local leader in debt capital markets development, in 2011 Kazakhstan looked set to become a regional equity powerhouse following the announcement by the country’s autocratic president, Nursultan Nazarbayev, of plans for extensive privatization.

Initial proposals for the People’s IPOs, as the programme became known, envisaged the sale of minority stakes in a dozen state-owned companies to local retail investors at a rate of two or three a year. Yet three years on, the only offering to make it to market has been a 10% stake in KazTransOil, which was sold by Kazakh sovereign wealth fund Samruk-Kazynafor KT27 billion ($179.5 million) in December 2012.

A second IPO, of national power grid operator Kegoc, was scheduled for May 2013, but never materialized. Plans for an offering of national carrier Air Astana similarly seem to have stalled.

The reasons for the delay are unclear. Reports suggest Kegoc’s listing ran into legal difficulties, but local market participants say the continuing merger of Kazakhstan’s 11 second-pillar pension funds into one might be equally to blame.

The drastic reduction in the country’s institutional investor base has already put a severe dampener on liquidity in the domestic bond market, according to Jean-Christophe Lermusiaux, head of research at leading local investment bank Visor Capital, and might also be acting as a deterrent to equity listings.

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