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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2010KAZAKHSTAN STOCK EXCHANGEECONOMIC AND POLITICAL DEVELOPMENTSEconomic and Political EnvironmentPolitical climate in Kazakhstan remains stable.2010 is the year of Kazakhstan chairmanshipin the Organization for Security and Cooperationin Europe (OSCE). This puts moreemphasis on the importance of internalpolitical stability to ensure successfulimplementation of the country's foreign policyand Kazakhstan's OSCE agenda for 2010which among other things includes: conflictmanagement measures in Nagorny Karabakh,recovery of Afghanistan, as well as fightagainst drug-trafficking. Greece and Finlandjoined Kazakhstan in the Troika of Chairmen ofthe OSCE. Global political experts believe thatKazakhstan’s chairmanship will bring “freshair” to the organization and hope for positivechanges in the international political climate.Kazakhstan continues its path towardsdemocracy. To guarantee proper functioningof democratic processes in the country thirtylegislative amendments were approved.During the next elections of the Lower Houseof Parliament of Kazakhstan which will takeplace in 2011, the amended legislation willapply. The amendments simplify the processof registration of foreign observers of theelections process. Freedom of access toinformation is also thoroughly assessed and inthe future sittings some tangible changes areexpected. The National Human Rights ActionPlan 2009-2012 furthers democratization ofthe country. By adopting this Plan Kazakhstanemphasizes its commitment to human rightsand a stable democratic society.By improving domestic political stability theGovernment of Kazakhstan emphasizes theimportance of positive investment climate thateliminates potential political risks. In 2009 thegovernment reviewed and revised itslegislation and improved its rating in the WorldBank Doing Business rating creating betterconditions for foreign and domestic investors.The year of 2010 is when the development ofthe Customs Union with Russia and Belarus iscoming into force. The Union allows freecapital movement and opens new markets toforeign and local corporations and investors.The country requires resources for sustainabledevelopment and therefore attraction offoreign resources is one of the public policypriorities.Economic PerformanceDespite of forecasts in 2009 KazakhstanGross Domestic Product (GDP) grew by 1.2%and amounted to KZT15.9 trln (US$107.3 bn)and turned out to be higher than thegovernment GDP growth prediction of 1%.At the same time the International MonetaryFund (IMF) forecasted decline of KazakhstanGDP by 2%. In 2009 the industrial productionvolume grew by 1.7%.Among significant reasons that positivelyinfluenced the economy growth in 2009 wereimplementation of the large-scale governmentprograms in the banking sector along withsmall and medium size businesses, and realestate sector support. In order to carry out theprogram of financial sector stabilization theNational Welfare Fund “Samruk-Kazyna”acquired control of two major banks inFebruary.Regardless of the defaults of the mosttroubled banks in the first half of 2009, thegovernment measures aimed at the economicand financial sectors stimulation resulted inrelative stabilization in the banking sector inthe second half of the year.As a result of price reduction on the mainexport products of Kazakhstan in the secondhalf of 2008, the export operations volume atthe beginning of 2009 considerably declined.In order to support the US dollar rate stability,the National Bank actively intervened in thecurrency market that resulted in decrease ofthe gold and foreign currency reserves volumeby more than 10% by February from thebeginning of the year.Consequently the National Bank devaluatedthe local currency Tenge by 25% on February5 and set the currency rate at KZT150 per USdollar +/- 3%, along with the Russian rubledevaluation of 56%. As a result the netinternational reserves (NIR) grew by 1.7% andamounted to US$47.6 bn by the end of theyear. In spite of the growth of prices onimported goods the inflation in Kazakhstanreached 6.2% in 2009, compared with 9.5% in2008.According to Kazakhstan governmentforecasts the economy of Kazakhstan willcontinue its recovery in 2010. The forecastedgrowth of GDP is in the range of 1.5-2.0%range, and the inflation rate of 6 - 8%. At thesame time the targeted currency rate for 2010is set around KZT150 per US dollar with thepossible strengthening trend.** Information provided by KSE.Key Information ContactsFinancial Institutions’ Association of Kazakhstan www.afk.kz/eng/National Bank of Kazakhstan www.nationalbank.kzMinistry of Finance of the Republic of Kazakhstan www.minfin.kzCentral Securities Depository www.csd.kzKazakhstan Agency for Financial Market and Financial Organizations Regulation and Supervision www.afn.kzREAL GDP(US$ billions)INFLATION (CHANGE PA; AV)(%)140120100806040200201816141210862005 2006 2007 2008 2009 2005 2006 2007 2008 2009PAGE 104