Kazakhmys reportedly will be first Kazakh company to list in Hong Kong

January 26. Central Asia Newswire

By Hal Foster

Kazakhmys reportedly will be first Kazakh company to list in Hong KongThe copper giant Kazakhmys will become the first Kazakh company to list its shares on the Hong Kong Stock Exchange, Dow Jones reported today.

Kazakhmys, which has been rounding up financing to develop new ore deposits, plans a public offering of $500 million to $600 million in Hong Kong in the first half of the year, according to the report.

The listing will be the first follow-through on Kazakh officials’ pledges last year that some of the country’s top enterprises will float shares on the Hong Kong exchange. The names most often mentioned were Kazakhmys and the minerals conglomerate Eurasian Natural Resources Corporation.

A Hong Kong listing would really make sense for Kazakhmys, which is due to announce its 2010 earnings tomorrow, because China and Europe are its largest customers.

The Kazakh officials who have been touting Hong Kong listings have said that the reasons that Kazakhmys and other Kazakh companies should list there include:

– Many investors in the West dumped shares of Kazakh companies listed on the London Stock Exchange when the global economic crisis began in the West in 2007, although they returned to the shares later.

– China’s purchases of Kazakhstan’s oil, gas and minerals have been jumping, and Hong Kong is the gateway to China.

– China has been investing heavily in Kazakhstan’s petroleum and minerals sector and in the country’s infrastructure, including refineries, pipelines, highways and rail lines.

– The Hong Kong Stock Exchange has gone out of its way to pursue listings of petroleum and minerals companies.

– A Hong Kong listing requires less red tape and can be done quicker than in New York, London or Tokyo.

Grigory Marchenko, the head of the National Bank of Kazakhstan, said 80 percent of Western investors closed out their positions in Kazakh companies listed on the London Stock Exchange when the global economic crisis started. They turned out “not to be reliable friends,” he said.

Many investors jumped back into the shares later, but the initial sell-off prompted Kazakh officials to begin thinking about other stock exchanges.

“We made a mistake by not paying attention to Hong Kong and the Middle East,” Marchenko said. The reason? For several years “it was too easy to attract money in London.”

China reached out to Kazakhstan with financing when the crisis was still on.

Kazakhmys secured a $2.7 billion loan from the Development Bank of China last year to help it develop its Bozymchak and Bozshakol copper deposits.

And it has established a joint venture with the Chinese metals company Jinchuan Group to develop the Aktogai deposit.

It needs new mines because the ore content of some of its existing deposits is declining and other mines are nearing the end of their useful lives.

“China is our main market,” a Kazakhmys spokesman said recently. “One of the ways for Kazakhmys to increase its presence and improve its recognition there is to get a listing on the Hong Kong Stock Exchange.”

A few years ago exchange officials began flying around the world encouraging international companies to list in Hong Kong.

The recruiting campaign followed a Beijing government decision in 2006 to allow Chinese companies to list their shares on the Shanghai Stock Exchange.

Competition from the Shanghai exchange prompted Hong Kong exchange officials to take steps to ensure Hong Kong wasn’t left in the dust.

“After 2006, we did not give up the China market, but at the same time, we have been promoting Hong Kong as a financial center outside Asia,” said exchange leader Ronald Arculli.

The countries that the exchange recruiters have targeted include Kazakhstan, Russia, Tajikistan and Indonesia. They’ve had a particular interest in mining, refining and energy companies.

The recruiting campaign has paid off. The Hong Kong Stock Exchange raised more money in initial public offerings than any other bourse in the world in 2009 – $31 billion.

Kazakhstan began discussing listings with Hong Kong exchange officials two years ago, according to Prime Minister Karim Massimov.

The next step was a conference in Almaty in May of last year focusing on how Kazakh companies could list in Hong Kong.

Then, in October 2010, Massimov visited Hong Kong to establish a fund to help Kazakh companies tap the city’s capital markets. A stock exchange listing is one of the most important options available, although not the only one.

The Kazakhstan government and three Hong Kong enterprises teamed up to start the $400 million Kazakhstan Hong Kong Development Fund.

Kazyna Capital Management, a subsidiary of Kazakhstan’s sovereign wealth fund, agreed to contribute $100 million. The Hong Kong partners – Cheung Kong Holding, Chow Tai Fook Nominees, Yung’s Enterprise Holding and C.A. Resources – put up the other $300 million.