A package from the People’s IPO: on written and common rules of exchange trade

May 19. Kazpravda

By Alevtina Donskih

A package from the People's IPO: on written and common rules of exchange tradeThe interest in the “People’s IPO” is increasing progressively with the concretization of the upcoming action (initial public offering). But before deciding to participate in the IPO, an individual should take into account at least two pieces of advice from the pros.

First they do no recommend acquiring of even the most attractive stock on the loan funds, since investments in securities have a long-term character and high returns are not guaranteed on them.

The second common rule says that one should not invest in securities the funds envisaged for vital purposes – accommodation, food, education, medicine. The shares are usually bought on the temporarily free money, which can be invested for a long term, without expecting immediate profits. “Therefore, our task is, on the one hand, to tell about the advantages of investing in securities, and on the other – to explain the risks that people can face” – with this preamble Deputy Chairman of the NBK Committee of the RFCA Development Chingiz KANAPYANOV began his interview.

– Genghis Serzhanovich, what is the interest for a person with low income to buy shares of companies?”

– An important characteristic of the program “People’s IPO” is the state’s desire to maximally protect people’s investors against the market and other risks. So only the securities of enterprises in which the state owns the full or majority shares are put up for sale. As a rule, the people’s IPO are held in favorable economic conditions, rather than during an economic downturn. In Kazakhstan, the IPO is scheduled to be held in the wake of economic growth. Our country has successfully overcome the global financial crisis. The IMF forecasts growth of Kazakhstan’s GDP in 2012 about 6%. I.e. there is every reason to expect that the shares of high liquid state companies or the companies with state participation will grow. That in turn allows us to predict the growth of the market value of securities and dividends on the shares. Both are in favor of the interests of their respective owners.

If we talk about another motivation to acquire such securities, it allows ordinary citizens to become shareholders or owners of large companies, i.e. to lawfully be engaged in the redistribution of national wealth. In addition, the growth of number of minority shareholders increases the transparency of companies and the level of corporate governance in them. Acquiring the skills of investing in less risky securities of quasi-state companies, then you can start to invest in other securities. It may be riskier, but potentially more lucrative.

– What objectives does the state pursue launching the process of “People’s IPO”?

– There are few tasks. First: the ownership of shares of successful companies gives citizens the opportunity to gain profit from their development and growth. It becomes possible with an increase in price of shares, and due to the payment of dividends. Second, the People’s IPO contributes to the development of the stock market at large. Providing nationals with the opportunity to purchase shares of the leading companies, the government thereby expands the range of investors. The increasing demand for the shares leads to the growth of their liquidity, which in turn have a positive impact on the stock market. Third, the state-owned companies can invest the funds attracted within the People’s IPO in their further development, acquisition of assets, modernization and expansion of production.

– Securities of what companies are planned to be put up for sale and when?

– The first “tier” which includes the shares of the JSC “KazTransOil” will be listed on the domestic market during the second half of 2012. The second “echelon” to be offered to the public in 2013, incorporated joint-stock companies: «KEGOC», «Air Astana”, “KTG”, “Kazmortransflot”, “Samruk-Energo”.

The third one is represented by “Kazakhstan Temir zholy” and “Kaztemirtrans.” Their securities will be sold on the stock market in 2014. And “KazMunayGas and “Kazatomprom” are planned to follow them, in addition to the blocks of shares of the “Kazakhmys”, and ENRC.

– What is the size of the package?

– In general, from 5 to 15% of shares of state companies are planned to be offered under the “People’s IPO» to the population and pension funds. But the size of the stock of each company will be determined on the one hand, by the fact that the state should retain a controlling stake in these companies, and on the other – free float of shares must be also provided. In other words they must provide the required number of securities to ensure liquidity and keep control.

– What about the public awareness campaign?

– The primary objective of the program “People’s IPO» is awareness-raising, and the Ministry of Economic Development and Trade jointly with the JSC “Fund” Samruk Kazyna” are responsible for that. At the same time the Committee for the RFCA development has enhanced work on overall financial literacy of the population. We organize on regular basis competent presentations, visiting workshops in the regions with the involvement of experts from the JSC “Samruk-Kazyna” and the Ministry of Economic Development and Trade. Articles and materials about “People’s IPO” are published in media and many TV and radio programs are devoted to it. The most popular are “The Alphabet of Capital”, “Smart Play”. In addition, the full information about the “People’s IPO” is available on the web portals www.fingramota.kz, www.profinance.kz, www.kase.kz, www.halyk-ipo.kz.

Investment activity requires some training and understanding. We therefore recommend anyone who intends to participate as a private investor in the program “The People’s IPO» to begin preparing for it ahead of time: to get the basic knowledge, to study the opportunities and risks.