Kazakhstan, spanning from the Caspian Sea to Western China, boasts diverse resources including agriculture, technology, and transportation. Traditionally known for its mineral wealth and fossil fuels, Kazakhstan is now showcasing economic resilience beyond its natural reserves. Two notable IPO successes highlight this shift: Kaspi.kz, a mobile super app, ranked as the third-largest IPO globally, while Air Astana demonstrated market viability with its triple IPO on the London Stock Exchange, Kazakhstan Stock Exchange, and Astana International Exchange.
Kazakhstan's progress prompts questions about its current state and future trajectory. Will the economy continue to diversify? How does it attract and support foreign investment? Is privatization underway? To shed light on these developments, Assel Nussopova spoke with Olivier Guéris, COO at the Astana International Exchange (AIX). With over 25 years of international experience in exchange operations and risk management, Mr. Guéris previously served as COO of the Qatar Stock Exchange before joining AIX. His expertise contributed to AIX's establishment as a financial hub for Central Asia and beyond.
Q: What are your views on Kazakhstan’s political reforms and economic progress during the last five years?
A: As an expat living in a friendly country, I cannot logically make judgements on domestic matters, the same applies to any expat in any foreign country. However, on a personal note, having been lucky enough to live in Kazakhstan for 7 years now, which is quite unusual as expats tend to stay here 3 years at the most, I have seen massive positive improvements in all fields of life, society and economy amidst a very challenging global context (Covid followed by the situation in Ukraine). The middle class is growing, which is crucial in assessing the progress made.
Q: What are your views on Kazakhstan’s efforts to diversify its economy?
A: It is inevitable that Kazakhstan, as a major oil and gas producer must strive to diversify its economy. I see major progress around education (most notably universities), agriculture-related ventures and Fintech / Smart Tech companies. Kazakhstan is a beehive for IT-related projects, the entrepreneurial and innovation spirit of its youthful population is unparalleled, only Saudi Arabia currently matches that in my opinion.
Q: How would you assess the investment climate in Kazakhstan?
A: Thanks to the establishment of the Astana International Financial Centre (AIFC), the investment climate for foreign investors has improved dramatically. But it takes time, things don’t happen overnight. It took 10 years for DIFC in Dubai to build its position as the financial hub of the GCC. AIFC, AIX, its Regulator (AFSA) and independent Courts of Justice and Arbitration have gradually gained the trust of major global players who are now knocking on our door to do business here. We’ve done a lot in 6 years and we’re starting to reap the rewards, which is fair enough, a lot of hard work has been put into achieving that.
Q: What has the government done so far to enhance the economy’s appeal for foreign investment (tax breaks, customs duty exemptions, regulatory processes)? What challenges are still remaining?
A: Again, the AIFC is the cornerstone for attracting foreign investments into the country. The fiscal and regulatory framework is in place, we just need to keep building up on the existing momentum and opportunities linked to the new global context.
Q: What needs to be done by the Kazakh government to reduce risks for foreign investors?
A: The AIFC was set up to meet that specific purpose. There is no zero-risk jurisdiction anywhere on the planet but, by giving foreign investors a platform they’re familiar and comfortable with, we create the conditions to attract capital over time.
Creating conditions for attracting global investors has always been a key part of AIX's strategy. AIX runs on the widely recognized Nasdaq operating system, is connected to Euroclear, uses the Avenir settlement system and is integrated with the global Swift network. AIX has seven custodian banks, including the largest foreign ones. We are a modern exchange that can provide global investors with services comparable to what London and Hong Kong offer.
But it should be clearly understood that foreign participants go only where the local market is well developed and where interesting assets are traded. Confidence in the market is created primarily through local investors, and as soon as a critical mass of liquidity is accumulated, foreign funds also begin to pay attention to this market. That’s why in addition to infrastructure, we need interesting assets, of which there are not many listed on the Kazakh market so far.
Kazakhstan, according to recent reports by analysts at index providers FTSE and MSCI, already meets the basic qualitative criteria of the "emerging markets" category in terms of regulation, legislation and stock market infrastructure. However, improving its position requires a 10-fold increase in equity trading volumes, a 3-fold increase in the capitalization of freely traded shares on the market and a 50% increase in the number of listed companies. If this can be achieved, entry into the MSCI or FTSE emerging market indices will provide more than double the amount of funds available today for investment in Kazakhstan.
Currently, Kazakhstan is categorized as a "frontier market" and no matter what interesting assets we offer to investors, for most global funds, investments in our country will only start making sense once they see a clear path towards an upgrade to "emerging market" status.
Q: Kazakhstan is trying to change its economic approaches. In particular, the idea of privatization is back on the agenda. In 2022, Kazakhstan’s most significant state-owned energy company KazMunaiGas had the largest IPO in Kazakh economic history. In 2024, Air Astana, the state air carrier is going for IPO as well. While such efforts seem to be positive developments, looks can be misleading. KazmunaiGas’ IPO showed only 3 percent becoming available for public trade, leaving the “privatized” company still very much in government hands. How much of the Air Astana shares will be publicly traded?
A: From AIX point of view, the Air Astana IPO was hugely successful. Over $200m were raised in Kazakhstan out of the total $370, meaning that close to 45% of the company’s shares are now free-floating. AIX opened trading in Air Astana securities on Friday 9 Feb under the conditional trading mode whereby investors can start trading the shares before they are allocated into their account. That’s never been done in Kazakhstan before and, to my knowledge, in any other frontier market. Kazakhstani investors absolutely embraced the idea and nearly $4 million worth of Air Astana shares were traded on AIX in just under 3 hours, local investors’ social medias and chatbots were buzzing all over about it with the proud feeling that they had just witnessed and, more importantly, taken part in something unique. Ultimately, that’s how AIX contributes to improve capital markets in Kazakhstan.
Q: Which other projects in Kazakhstan will be open for public trade in the near future?
A: Rule number one for an Exchange is to not talk on behalf of potential Issuers. Samruk Kazina’s privatization plans are publicly available on their website. Our job is to be ready to provide the goods when they make a move, as we just did with Air Astana. In parallel, we also focus on non-government issuers. We had a stellar year in 2023 with more than 60 issuances of private and public bonds that sent our trading numbers skyrocketing. We hope to convert that try in 2024 with straight-listings and IPOs of private sector companies as well as dual listings with other Exchanges.
Q: What’s your vision for the future of Kazakhstan for the next five years?
A: I’m resolutely upbeat on Kazakhstan’s prospects. With its immense natural resources, geostrategic position and young population of well-trained IT geeks, Kazakhstan has all the trump cards in its hands to make major leaps forward and succeed in becoming the economic hub of Central Asia and the Caucasus.
By Assel Nussupova
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