Kazakhmys’ Succefful Hong Kong Listing, the First of Many to Come?

July 15. MFA

Kazakhmys’ Succefful Hong Kong Listing, the First of Many to Come?The announcement that a major Kazakhstan-based international natural resources group Kazakhmys PLC completed its successful listing on the Hong Kong Stock Exchange a few weeks ago has brought forth vivid discussions among experts, both local and international.

Kazakhmys (mys in Kazakh means copper, which is one the company’s main product) declared it will now trade its shares in Hong Kong under the stock code of 847 HK.  The listing took place without additional issuance or sale of shares. Nevertheless, the group says it may consider issuing some shares on the Hong Kong market at a later date in order to assist liquidity.

“The secondary listing in Hong Kong is important for the strategic development of Kazakhmys. Asia and, in particular, China are of great interest to the company in terms of customer base and financing. The listing will enhance the company’s image in the main financial center of the region and support the future growth of its business, providing access to a wider range of investors”, the company’s General Managing Director Oleg Novachuk said.

“We are pleased that Kazakhmys PLC listed its shares in Hong Kong. This company is important not only for Kazakhstan but for the entire world as well, which is proved by the fact that the shares of Kazakhmys are also listed on the London Stock Exchange (LSE)”, Chairman of Hong Kong Exchanges and Clearing Limited Ronald Arculli noted.

“Kazakhstan, which over the past decade has been experiencing rapid economic growth, is an important partner for us. President Nursultan Nazarbayev visited Hong Kong several times and we are willing to increase business activities between our countries”, he added.

After the global financial crisis hit the world in 2007, a lot of large issuers seeking the funds, investors and new partners reoriented their activity towards the East, having chosen the Hong Kong stock exchange as a major business platform. Kazakhmys was the first Kazakh company to test the interest of Asian investors in the mining sector.

In contrast to the traditional IPO (initial public offering) when a company issues common stock or shares to the public for the first time or SPO (secondary market offering) that implies offering a large block of securities that have been previously issued, Kazakhmys suggested its shareholders transferring a part of their shares from one trading platform (LSE) to another (HKSE). This kind of diversification provides the issuer with some flexibility enhancing its capabilities to attract investments and minimize liquidity risks.

Chairman of Kazakhstan’s National Bank Grigory Marchenko said in an interview with the Financial Times back in December 2009 that some Kazakh companies were planning to move part of their fundraising away from London because the UK investors failed to stand by the central Asian state during the financial crisis.

“Over-relying on London was a mistake because too many people ran away in the crisis and proved to be our fair-weather friends,” he was quoted as saying.

Today representatives of Kazakhmys are convinced the entry onto the Hong Kong market has put the company on the right track from the strategic, economic, political, and integration points of view.

Chairman of the Board of Kazakhmys Vladimir Kim listed a number of reasons in favour of Kazakh mining company’s entry onto the Hong Kong stock exchange.

“Kazakhstan has long been cooperating with China both in political and economic spheres, which involves Shanghai Cooperation Organisation (SCO), a wide variety of bilateral agreements, as well as joint infrastructural and transport projects,” he said.

“China is turning into the world’s leader in the sphere of innovations. In this situation, listing shares on the Hong Kong stock exchange by the leading companies from Kazakhstan is part of a large business-package implemented through the joint efforts of China and our country,” Kim said.

“Another important reason for this step is the high level of integration of Kazakhmys into the Chinese economy, as we have been supplying copper to the country since 1995. More than 50 percent of our annual production goes to China. We have established strong partnership links with Chinese companies and banks, and are closely cooperating with each other,” Kim added.

Other reasons why investors consider Kazakhmys an important strategic partner includes high demand for its production in China and growth in demand for copper in the region, which lets the group maintain a high level of profitability, as well as low cost production, the company’s transparency and active integration into the regional economy. In addition, Kazakhmys is part of the FTSE 100 Index.

Independent experts agree all of these factors, indeed, form a positive background for the company’s further diversification. They remain, though, rather restrained in their preliminary assessments noting the Chinese and Asian investors should thoroughly examine positions of the Kazakh company from the point of view of risks and investment prospects.