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Blooming bonds, wilting equities

President Nursultan Nazarbayev wants Kazakhstan to become a regional capital markets hub for central Asia. But as Guy Norton reports from Almaty, attracting sufficient investor demand will not necessarily be easy.

SAY WHAT YOU like about Kazakhstan's president Nursultan Nazarbayev but you could never accuse him of lacking ambition. Not content with having the best banking, payments and pension fund systems in the former Soviet states, he also wants to have the best capital market in the region as well, and to attract listings from neighbouring countries as a result.

At the third Congress of Kazakh Financiers held in the country's financial capital Almaty in February, the sprightly 63-year-old leader bemoaned the slow pace of development of the country's stock market and lack of investor interest in it.

The mountain that the country's stock exchange, the KASE, will have to climb to win investor demand for Kazakh equities is clearly illustrated by the recent lack of activity on the Almaty bourse.

"In the last week of February the total trading volume on the KASE was just $1.7 million - it's a cheap market because investors expect a pricing discount for trading such a tiny, illiquid market," says Murray Davey, director at dedicated emerging market fund manager Rexiter Capital Management in London.

It reveals the parlous state of the Kazakh equity markets that one of the biggest recent trades involved the sale by Kazkommertsbank of 150,000 common shares in Air Kazakhstan to the committee of state property and privatization of Kazakhstan's ministry of finance.

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