All Roads Lead to London

From Biznes i Vlast:

In the next two years, IPO’s will again become a hot topic for Kazakh issuers, says Arman Moldakhmetov, Almaty-based managing director of the PBN Company, a consultancy. According to him, mid-size companies and banks are well advised to consider Russian stock exchanges as a source of capital.

How do you assess the prospects of conducting IPO’s by Kazakh companies in the near future?

We think that initial public offering is a process that will actively develop not only in Russia but also in Kazakhstan. The results of 2007 showed that of the four Kazakh companies conducting IPO’s, ENRC was the largest issuer. We believe that within the next two years, not only companies from the financial sector but also other companies will seek financing on international exchanges — although financial institutions will continue playing the most significant role. Specifically, we expect increased activity in the agricultural sector and companies with activities in the infrastructure, engineering and transportation sectors. These segments of the economy, we think, are most attractive for international investors and most in need of financing.

However, specifically the ENRC’s initial public offering on the London Stock Exchange (LSE) stirred up a wave of criticism…

The answer to your question is the size and liquidity of the stock market in Kazakhstan, and also the cost of financing. In London, the money is cheaper. I don’t think that if ENRC conducted its offering on, say, the RFCA (Regional Financial Center Almaty), it would be able to attract the same funding as it did on the LSE. Everything is a matter of liquidity, which we lack. In Russia, for example, the liquidity is greater, and therefore, the stock market works there. It is also a matter of trust by the population, which is supposed to buy the shares. The offering of shares by Kazakhtelecom has shown that only well informed people were buying the stocks while the majority of population simply did not know why they should buy them. Many actually suspected that it was some type of a scheme like those pioneered during the coupon privatization. Therefore, I think that ENRC chose the right approach. They needed money - and they attracted it in the cheapest possible way. This possibility just does not exist in Kazakhstan today.

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News Roundup - March 11, 2008

Financial Times: ENRC suing Brussels for €200m

Eurasian Natural Resources Corporation, a mining company based in Kazakhstan but listed in London, is suing the European Commission for up to €200m in damages over lost sales after Brussels imposed anti-dumping tariffs on the company last December…

Hemscott: Max Petroleum increases Macquarie credit facility to 50 mln usd for exploration

Max Petroleum PLC, an oil and gas exploration company said, it has increased its revolving credit facility with Macquarie Bank Ltd to 50 mln usd from 20 mln usd, to fund its exploration and development activities in Kazakhstan…

Hemscott: Hambledon makes partial restart of Sekisovskoye gold mine after accident

Hambledon Mining PLC announced the partial restart of operations at its gold mine at Sekisovskoye in east Kazakhstan after a boiler accident on Feb 12 that resulted in the death of an employee…

Moscow Times: Investment needed for agriculture

Russia and neighboring countries would be able to increase their agriculture production with more private investment, the Food and Agriculture Organization and European Bank for Reconstruction and Development said Monday…

Bloomberg: Wheat may fall as Russia, Kazakhstan, Egypt increase planting

Wheat may fall for a second session on speculation that farmers in Russia, Kazakhstan and Egypt will increase production to take advantage of prices that have doubled in the past year…

Institute for War and Peace Reporting: Computer courses leave Kazaks cold

The programme, which has a budget of 15 billion tenge or 125 million US dollars and is designed to train 2.4 million people in computer skills between 2007 and 2009, only attracted 200,000 last year, according to Information Initiative, a watchdog group that is monitoring the progress of the government’s IT campaign…