Kazakhstan’s new financial hub seeks exclusive rights to public offerings

A general view of downtown Astana, Kazakhstan, October 8, 2015. REUTERS

Kazakhstan’s new foreign investment hub the Astana International Financial Centre (AIFC) has asked the government for exclusive rights to public offerings of some of the country’s most prized assets due to be sold later this year.

The Central Asian nation plans to float its flagship carrier, Air Astana, former monopoly Kazakhtelecom and the world’s biggest uranium miner Kazatomprom in 2018.

Large Kazakh companies, both state-owned and private, have usually listed both abroad, where they raised most cash, and at home. However the new bourse, in which the Shanghai Stock Exchange holds a 25 percent stake, has bold ambitions to make Astana a new hub.

“It is crucial to us that the initial public offerings are done on the AIFC platform because this is the only, historic chance for the Kazakh stock market to really start attracting liquidity,” AIFC governor Kairat Kelimbetov told Reuters.

Dual listings, he said, end up shifting liquidity from the smaller market towards the bigger one.

It is not yet clear how the government will list the state-owned companies but Kelimbetov is a trusted adviser of President Nursultan Nazarbayev who has run Kazakhstan since 1989.

Kazakhstan’s stock market is small and illiquid as local firms have usually relied on bank financing. But the 2008 global financial crisis and the 2015 oil price crash have left Kazakh banks with bad loans and little appetite for fresh lending.

Kelimbetov, a former government minister and central bank governor, said AIFC, set to launch its stock exchange this year, wanted to jump-start the securities market by offering access to IPOs and government bonds – which may soon become Euroclearable.

He added he expected Asian, primarily Chinese investors, to account for 50 percent of activity, fellow ex-Soviet nations, predominantly Russia, to account for 30 percent, and the rest of the world for the remaining 20 percent.

The exchange could later add exchange-traded funds, commodities and other instruments, possibly cryptocurrencies.

CORPORATE HAVEN

AIFC, set to move into offices by a spherical glass building resembling the Death Star from the Star Wars movies in a newly developed part of Astana, also aims to serve as a post-Soviet corporate haven by offering business-friendly regulations and a legal framework based on English law, with its own court.

The same framework combined with a promise of transparency, it hopes, will attract private wealth managers.

“Many (of them) have issues in terms of compliance when it comes to the former Soviet Union,” he said. “We are targeting such companies and Deutsche Bank has already said it might open a representative office (for its wealth management arm in Astana).”

Asked if AIFC could effectively become an offshore jurisdiction, Kelimbetov said:

“I prefer the mid-shore idea”.

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Reuters