Samruk Kazyna’s subsidiaries to issue Initial Public Offerings in March


Samruk Kazyna’s subsidiaries to issue Initial Public Offerings in MarchKazakhstan’s Minister of Finance Bolat Zhamishev announced that in March national companies will begin issuing stocks in the domestic market. While it is still unknown what companies will issue the first public shares, they, according to Mr. Zhamishev, are “definitely” going public. The subject of the phased IPO process will be the subsidiary companies of the Samruk Kazyna Sovereign Wealth Fund. The initial public offering of state companies will be minority stakes, up to 10%.

At a meeting chaired by Prime Minister Karim Massimov on 3 February 2011, members of the Council on Economic Policy (SEP) addressed various issues in withdrawing government participation from state companies. Developing the mechanisms of the stock market will fully engage the public as well as the accumulated pension funds in order to raise equity for domestic companies. Speaking with Serik Akhanov, head of the Association of Financial experts, on 25 January, Massimov promised that the amount of enterprises put up for public IPO will be “much more than two”.1

Companies which hold strategic meaning for the country’s economy and security such as Kazatomprom and KEGOC are not exempt from the process. Despite current restrictions on the trading of electrical power companies, members of the SEP unanimously agreed that these obstacles in legislation can be resolved.

The decision to expand shares in order to raise capital for the state enterprises and attract more shareholders coincides smoothly with the Kazakhstan Stock Exchange’s (KASE) strategy to become a top regional financial market. KASE aims to empower local citizens as well as investors from around the world to trade in a wide spectrum of financial instruments of Kazakhstan while being exposed to minimum calculated risks and in accordance with the best international practices.

Already in the middle of last year, Kairat Kelimbetov, CEO of Samruk-Kazyna, has been hinting that 2011 will be a great year of “people’s IPOs” where pension funds and citizens will be able to participate in the buying of various shares in the market.

Kazakh companies have been trading on Europe’s largest trading floor, the London Stock exchange, since 2005 and have done well for themselves. However, Kazakh National Bank’s Governor Gregory Marchenko, comments that it was a mistake to underestimate Hong Kong and the Middle East. The reason? For the past several years, “it was too easy to attract money in London.” But when the global economic crisis started, 80 percent of Western investors closed out their positions in Kazakh companies listed on the LSE. They turned out “not to be reliable friends,” says Marchenko. While many investors jumped back into the shares later, the initial sell-off prompted Kazakh officials to begin thinking about other stock exchanges. Currently, major companies listed in London include JSC Halyk Savings Bank of Kazakhstan, JSC Kazkommertsbank, and JSC Kazmunaigas Exploration Production.

Kazakhmys, Kazakhstan’s largest copper miner, plans to raise US$ 500-600 million via an Initial Public Offering (IPO) on the Hong Kong Stock Exchange, the Dow Jones newswire reported citing unnamed sources familiar with the situation. The IPO, planned for the first half of 2011, would make Kazakhmys the first Kazakh company to be listed in Hong Kong. Kazakhmys is also the first major Kazakhstan company to list in London raising ?661 million in 2005.

Prime Minister Karim Massimov began discussing listings with Hong Kong exchange officials two years ago. The next step was a conference in Almaty last May focusing on how Kazakh companies could list in Hong Kong. The names most often mentioned were Kazakhmys and the minerals conglomerate, Eurasian Natural Resources Corporation. The Kazakhstan government and three Hong Kong enterprises teamed up to start the US$ 400 million Kazakhstan Hong Kong Development Fund. Kazyna Capital Management, a subsidiary of the Samruk Kazyna, agreed to contribute US$ 100 million. The Hong Kong partners – Cheung Kong Holding, Chow Tai Fook Nominees, Yung’s Enterprise Holding and C.A. Resources – put up another US$ 300 million.

The listing, view on a wider scale, is beneficial not only for Hong Kong but also for the relations between Kazakhstan and China. China’s purchases of Kazakhstan’s oil, gas and minerals have been jumping, and Hong Kong, placing itself as a gateway to China has quite a few advantages over other financial capitals of the world. A Hong Kong listing requires less red tape and can be done quicker than in New York, London or Tokyo, a bi-weekly online publication of the Ministry of Foreign Affairs of the Republic of Kazakhstan reads.

China, which has gained a favourable reputation by reaching out to Kazakhstan with financing during the crisis, has been investing heavily in Kazakhstan’s petroleum and mineral sector and in the country’s infrastructure, including refineries, pipelines, highways and rail lines..

Not surprisingly, Kazakhmys which has secured a $2.7 billion loan from the Development Bank of China last year to help it develop its Bozymchak and Bozshakol copper deposits, views China as the “main market.” A Kazakhmys spokesman recently stated that  “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.”

As the first March trading activity of major IPOs on the Kazakhstan Stock Exchange in Almaty is approaching, Kazakh companies are also carefully studying developments in Hong Kong and Dubai.