Domestic investment - basis of economic growth in Asia- ADB

Astana, Kazakhstan, May 11
By Daniyar Mukhtarov - Trend:

The securities market in the Asian region is waiting for the impact of new impetus in the short run, the Asian Development Bank experts believe.

"ADB management stated about its intention to support the development of the bond market in Asia," the press-service of the Organizing Committee of the past 47th annual meeting of the ADB Board of Governors held in Astana reported.

Namely this market is considered as a critical channel to direct savings and put them towards the needs of economic growth, ADB Vice-President Bindu Lohani said.

ADB for its part is working to create a regional concept of the bond market. The Credit Guarantee and Investment Facility has been established together with the ASEAN +3 (Association of Southeast Asian Nations plus China, Japan, Korea) - to motivate issuers to issue longer-term bonds with longer maturities.

"The development of bond markets in Asia is a key element for economic growth. The bond market is an integral part of the securities market with the circulation of long-term debt obligations. The bonds play a crucial role in the development of the global stock market, in many developed countries bonds make up 60-65 percent of the total capitalization. The development of the bond market in European countries happens in a slower pace, as in most countries, the economy is financed by bank loans," the report said.

In regard to Asian countries, 2013 was a record year in terms of volume of bonds sold in euros, dollars and yen. The investors willingly purchased debt instruments, despite income growth in the United States.

The volume of transactions amounted to $143.8 billion in 2013, beating the previous record by $133.8 billion (2012), according to HSBC and Deutsche Bank. The experts expect that the demand for bonds in Asia will decline slightly in 2014, however, the volume of outstanding bonds will probably still be great. However, the experts agree that the pace of development is not only the bond market, but in general, the securities market leaves a lot to be desired. Meanwhile, this market can be a good source of additional investment.

"Kazakhstan is actively developing its stock market, betting on the "People's IPO" program in which part of the shares of large state-owned companies may be acquired by ordinary citizens. JSC " KEGOC " shares, in particular, will be placed on the local stock market this year, the report said.

As Deputy Chairman of the Board of Samruk-Kazyna JSC Elena Bakhmutova assured KEGOC`s preparation for IPO entrance is based on the best international practices, which means increased demands on the level of disclosure of information about the company.

This work involved the leading domestic and international consulting companies. Conduction of the due diligence, preparation of the prospects issue and other related legal documents, the conduction of the business evaluation and the marketing strategy development are considered during the JSC "KEGOC" preparation for IPO. Individual parameters of tariff regulation, providing the company's profitability in the medium term have been determined. Furthermore, the changes in prospectus of securities have been registered for the IPO purposes, filed an application for the inclusion of the company's shares to the official list of Kazakhstan Stock Exchange, and the analysis of the risks was conducted.

Recall, this is the second tier companies entering the "People's IPO". The first company was "KazTransOil". The mechanisms were tested, the weaknesses and even gaps have been found in the legislation, not allowing to involve some "national" companies in to the stock market on the first attempt.

By taking account into the defects the Kazakh government now prepares for the second "echelon" of the companies. And, in particular, as expected, after making the necessary changes in legislation and the final resolution in the approaches to the parameters of the tariff regulation in December, the shares KEGOC will be put up for auction on the Kazakhstan Stock Exchange.

As KEGOC is a natural monopoly; therefore, the company's success is largely determined by the current tariff system. On this basis, it is expected that the loyal investors will show interest in the participation in KEGOC with the purpose of not receiving momentary super incomes, but oriented on a stable income in the medium term.

"The main positive aspect of the output shares of " KEGOC " the stock market is the stability and predictability of its activities. The results obtained on the basis of expertise, allows drawing the conclusion that the company has good prospects for growth in the presence of a balanced tariff policy. Herewith, dividend policy of "KEGOC" JSC provides for the payment of dividends on common shares not less than 40 percent of net income. Thus, loyal investors are able to get within 5-7 years the yield not lower than the interest rates placed on deposits in the second tier banks ," the Organizing Committee's report said.

Translated by S.I.
Edited by C.N.

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