Almaty. December 2. KazTAG - Askhat Akhmetbekov. Kazakhstani stock exchange market has been experiencing critical moment, however, the moment of truth is underway. In the interview to KazTAG Andrey Tsaluk, vice president of Kazakhstani stock exchange, said that now we are on a certain stage, when the domestic market development is expected to follow a different way than before. Functioning of the stock market will depend on this direction.
-Andrey Yuryevich, it is know that in the latest few years 32 companies listed at KASE faced default, 22 of them were delisted. According to the experts about 20% members of the stock exchange may default too. How can it happen?
-You shouldn't forget the situation is quite uneasy at the markets. Looks like we are on the threshold of interesting events taking in account the situation in Europe and the United States. If the development goes on the worst scenario the negative affection will concern Kazakhstan. It may happen through prices fall for the basic goods of Kazakhstani export. Now these prices, first of all oil prices, are comfortable for Kazakhstan. But it can't be forever. The world recession may result in demand regress for our crude products.
-Does it mean defaults are not excluded?
-In this case they are not excluded. But 20% volume seems to me incredibly high. It doesn't mean that it can't be forecasted. But first, it is serious work, second, representation of such prognosis is low. And, which period are they talking about? If it is about 2012, undoubtedly 20% is too much.
-However, I suppose, the stock exchange conducts analysis of its issuers and it reveals companies which might be buffered tomorrow. Is it so?
-Yes, the stock exchange does it. On receiving a new document from a listing company it is analyzed, we make certain conclusions concerning the new trends of the company's development. Sometimes the stock exchange requires the documents, being based on the mass media messages or other signals. If something creates concern, the monitoring department focuses attention of corresponding specialists on "unfortunate" companies. But it is strictly for our internal use.
And only if concerns ignorance of listing requirements we prepare a conclusion for the listing commission and according to its decision we report it to the public, including investors and shareholders of this company.
-How can you characterize current condition of the stock exchange market of the country?
-It is in wonderful condition. I mean, its condition can only improve. It is a joke, but with a share of truth. Talking seriously, I think our stock exchange market is on the threshold of serious changes.
The crisis makes all the market players including the regulators reconsider many things. Significant changes have been brought into the rules of game. They are very significant. It happens on the background of falling shares market, which lost 36% this year. We have almost no tools which might let us earn on the declining market.
The profitability is low on the state securities market, and the volume of their issue is low. Only very big quasi state companies feel good on the market of corporate bonds. For smaller companies the funding is too expensive, there is a trust crisis, many companies are still facing the music of default. Banking crediting is growing slowly.
-The situation leaves something to be desired...
-For example, the securities market need liquidity like the air. Thus, the securities must be actively traded. In this case infrastructure can get profit. Market-makers have always acted as liquidity providers, able to hold narrow spreads. To keep quotations and these spreads the spread-makers must have a lot of securities and money. However, according to the regulator it is risky to hold a lot of securities of the issuers with average credit ratings, there is shortage of owned capital, while it is not profitable for market makers to hold money on their accounts only to perform their obligations. Even a banking deposit guarantees better profit.
It is only one example why the capital outflows from the market. There are a number of such examples.
-And what is the result?
-Result? If every day the sum of bargains concluded at KASE made $11-12 mln in 2007, now we hardly reach half a million. In that time the volume of bargains was over a billion dollars at the whole stock exchange, now it is a bit higher than 500 million. The number of listing companies is decreasing.
I have told about change of game's rule before. They are brought not only by the regulator, we also bring them. In the last 3 years we brought more than in the previous 10 years. The majority of them do not increase profits of the stock exchange and the market players. But they are essential. However we would rather bring them in the time when the market brought a lot of money and a lot of opportunities.
-It means the situation is really poor?
-I mean now we are in the stage, when Kazakhstani stock market, apparently, will change. It can't disappear, thus, it will change.
- How exactly?
-Risk management rethinking is supposed to make brokers, pension funds, banks and stock exchange work in a different way. They already work differently. The market will become more reliable, there should be less cases of abuse, for example, with pension assets. There should be less defaults, unperformed bargains, incorrectly estimated assets and etc. If Kazakhstani brokers can't or don't want to perform their functions effectively, unfortunately, they will have to compete with Russian colleagues. Financial consultants of securities issuers will have to carry responsibility as listing partners. The institute of bonds holders’ representatives will be used more widely. Retail investors should work at the market and there should be a lot of them.
These are not empty words; it is result of our projects which are being developed now. It is pity that their implementation came on the period of uncertainty in Europe and the US.
-Does it mean that the moment of truth is underway?
-I think so. It is not such a pity moment as it might seem. During the issuers' forum we saw potentials of new Kazakhstani market. The crisis required reforms which have almost accomplished.
-How long can this period last?
-If uncertainty in Europe and the US resolved positively, the market would start growing and this stage would be accomplished very soon. Because money is needed for the mechanism to work to the fullest. Declining market does not generate money.
-Looks like the uncertainty may last for one-two, five or even ten years.
-You see, during all the international forums they say: high volatility - looks like it is reality which will follow us longer than for a year or two, we have to get used to it.
-When will we see the final transformation and transfer to a new stock market?
-Everything that I have said is my subjective opinion. Perhaps, many people won't understand me and share my vision.
I can't and I don't want to name concrete term, it would be silly. But if the situation in Europe and the US resolves for worse, we will need two-three years of construction works. If the debt crisis is resolved, we will see the first upswing on the wave of the first stage of people's IPO. But if... Well, I won't talk about negative. Kazakhstan is well protected due to its reserves and balanced policy, anyway, we won't have easy time.
-Is foundation of this new market, you have stated about, connected with expected "people's" IPO, and assumed entry of saving pension funds? There was time when big hopes were relied on the pension funds, expecting them to give development impulse...
-We (stock exchange) are trying to do our work before the “ people's” IPO, to help other brokers, depository, investors. It is important not to miss the moment and use it. Here we implement our strategic tasks for liquidity increase. We need to take a complex of measures not to miss the moment. This way our measures, people's IPO and increase of Kazakhstani rating will bring a synergy effect for the market development.
-What if people's IPO doesn't justify your hopes?
-The stock market will be like it is now, but even in this case we plan to develop it. Now we know how to do it. The main thing is that necessary fundament was created for this. The system of risks management on repo market has been elaborated and meets the new world standards. KASE has launched trade with securities on T+0 scheme. Recently the stock exchange has launched a sluice which lets us connect with the data of trade platforms of Internet-trading. Two platforms, which are very popular in Russia, have been connected. Two Kazakhstani platforms have been connected as well. Derivatives market has been launched. Investors from all over the world can see our trade data in real time regime. We need time, hard work, and understanding of the regulator.
-Summing up what is the hope for Kazakhstani stock market today?
-Good news from the West and correct implementation of people's IPO program. It is the main thing.
-Thank you for the interview.