Kazakhstan Rating Raised to BBB+ by S&P on Commodity Exports

Nov 8. Bloomberg

By Jason Webb

Kazakhstan Rating Raised to BBB+ by S&P on Commodity ExportsStandard & Poor’s raised its rating of Kazakhstan one step to BBB+, its third-lowest investment grade, with a stable outlook, citing the effect of rising commodity exports on fiscal and current account surpluses.

Kazakh oil output will probably almost double over the next decade and net foreign direct investment will average about four percent of gross domestic product, feeding per capita GDP growth of an annual six percent from 2011 until 2014, S&P said today.

“We take into account strengthening fiscal and external balance sheets weighed against political uncertainties and a stronger, but still weak, financial sector,” S&P analysts led by Ana Jelenkovic said in an e-mailed statement.

The agency now rates Kazakhstan one level higher than Russia, two higher than Brazil and the same as Thailand. Moody’s Investors Service rates Kazakhstan one level lower at Baa2 and Fitch Ratings has it at its lowest investment grade, BBB-.

The cost of protecting Kazakh debt against non-payment for five years using credit-default swaps was little changed at 243 basis points, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. This compares with 210 for Russia, 146 for Brazil and 188 for Thailand.

The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements. They’re also used to speculate on bond movements.

Kazakhstan’s gross government debt is equivalent to 12.9 percent of GDP, according to the International Monetary Fund’s World Economic Outlook database.