Bakytzhan Sagintayev: The State intends to offer Kazakhstanis the shares of stable companies
June 03. Kazpravda
By Stepan LEMESHEV
Minister of Economic Development and Trade Bakytzhan Sagintayev tells about the aims of the program “People’s IPO” to be launched in September of this year and its advantages for Kazakhstanis.
– In September 2011 the Government adopted a program to put up for sale the shares of subsidiaries and affiliates of the JSC “National Welfare Fund” Samruk Kazyna” on the stock market,” or the so-called program “People’s IPO”.
The IPO -Initial Public Offering is a common international practice for the placement of securities from different sectors of economy among a wide range of the population. As a rule, the “People’s IPO” put up for sale the securities of the companies in which the state is a full or majority shareholder.
The “People’s IPO” pursues several purposes. 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.
“The People’s IPO” took place in different economic conditions in many countries, including Britain, Poland, Russia, Brazil and India. For example, in Britain such a program was conducted under the leadership of Prime Minister Margaret Thatcher in the late 80-90s. Then the shares of the largest national companies, such as “British Gas”, “British Steel”, “Rolls Royce” and the companies of the electricity sector, water and coal industry were listed for the population.
In the emerging market economies the placement of shares owned by the state, was the main factor for the development of stock market. For example, As a result of mass privatization of state-owned companies in Malaysia in 1970-1980, the stock market of the country attracted more than eight million people. In Croatia they successfully listed on the stock market the shares of the telecommunications and oil and gas companies.
– But we know about negative experiences, for example, “People’s IPO” in Russia…
– The practice of the Russian “People’s IPO”, which began in the summer of 2006 with the public offering of shares of “Rosneft” just indicates that the investors were people, who understood neither the risks associated with investment in stocks, nor the principles of such risks’ management.
None of the potential owners is insured against the fall of prices for the shares after their placement. In particular, in Russia after the “People’s IPO” prices for securities collapsed in three – seven times. For instance the price of the shares of Vneshtorgbank (the second largest Bank of Russia in the size of major indicators) fell from 13.6 kopeks – the offering price, down to 1.9 kopeks, and the securities of the “Rosneft” depreciated by more than 11% of the offering price. As a result, the well-publicized “People’s IPO”, left cold the Russians, put it mildly: thousands of people who bought the shares, not only failed to make a profit, but also suffered losses.
Many analysts do not advise to buy shares during the IPO. The reason is that the companies prefer to conduct IPO at the top price border. Therefore, as the experts suggest, it’s more advantageous to purchase the shares later – on the stock exchange.
As demonstrated the Russian practice of “People’s IPO”, considerable preparatory work for its successful implementation is required. It is advisable to organize at least three – six months active work with a wide coverage of all regions of the country. The information should be targeted, with clear to public lexicon, and open reminder of risks associated with acquiring shares. It is also important to convey to people that buying stocks – it is not a deposit (which is insured), and there is no guarantee that tomorrow the price of securities will grow in value. I.e. we must understand that “The People’s IPO” is another tool, available to citizens in the financial market.
– 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 the 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 the ENRC.
Phasing of shares’ listing in the market is conditioned by the companies’ readiness for the IPO and capacity of domestic stock market.
At the same time peace and harmony in the country, sustainable development of Kazakhstan’s economy allow us to expect a further increase in the cost of national companies, and therefore a good income for the people’s investors.
– 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.