Kazakhstani financiers sum up the results of last year

The Association of Financiers of Kazakhstan (AFK) has summed up the results of 2023 for the country’s stock market. In its review of the market, the AFK analyzed the performance of stock indexes, the stock value of leading Kazakhstani companies and the pool of retail investors and assets under management by investment companies, among other factors.

KASE and AIXQI, two main indexes that reflect the performance of Kazakhstani public companies, managed to rebound from the decline of 2022 and grew by 29% and 30%, respectively. Both indicators have reached their historical highs.

At the same time, stocks from the blue chips category showed double-digit growth, except for KEGOC, which placed additional shares on the KASE and AIX. Even though the company prefers to call it SPO, it has issued additional shares that do not match the classic SPO. Last year, the stock value of KEGOC declined by 8%.

Both stock exchanges of Kazakhstan reported an influx of retail investors last year: 1.1 million people on the AIX and 146,000 on the KASE. The AFK believes that this happened against the backdrop of banks’ efforts to expand their client base and transfer retail portfolios under Kazakhstani jurisdiction. Also, some Russian companies previously registered abroad (mainly in offshore jurisdictions) have redomiciled to the AIFC or announced such plans. Among them are Polymetal, Fix Price and Dodo Pizza.

The overall number of retail broker accounts in Kazakhstan in 2023 reached 2.2 million; 70% of them are opened in the AIX central depository. The aggregated volume of assets under management of investment companies has grown by 30.6% to $2.4 billion. The AFK believes that further growth potential is much bigger than that.

Last year, foreign investors cut their investments in notes by the National Bank of Kazakhstan due to the start of a cycle of the base rate decreasing. However, in January 2024, their share in this type of asset rose fourfold from 0.9% to 5% despite public securities reporting lower yields after the base rate was lowered.

At the same time, short bonds reported a much faster pace of decline than long bonds: 50 to 190 basis points versus 30 to 60 b.p. When the regulator lowers the base rate, investors usually buy up long bonds to obtain higher yields as long as possible. In turn, this spike in interest in securities causes price increases and a decline in yields.

In 2023, the amount of public debt placement and corporate bonds rose by 26% and 2%, respectively. The AFK explains this with the necessity of attracting funds for the budget and the active presence of different companies in the capital market.

“The country’s stock market is stepping up to a new level by addressing the needs of those companies which need capital and those which want to place it at a profit. For instance, in 2023, local investors reported double-digit profitability of their investments on the domestic stock market and abroad,” the AFK highlighted.

The authors of the survey noted that the government should double-check a tax reform it is planning to find out whether it is fair for all interested parties. This approach, for example, must take into account possible losses of investors during taxation of their income obtained on the stock market.