JUNE 2013 - FEAS

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FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013KYRGYZ STOCK EXCHANGEIn 2009 trading volume of the KyrgyzStock Exchange has decreased 29.4% incomparison with 2008.Kumushbek ShamkanovPresidentIn 2009 trading volume of the Kyrgyz StockExchange (KSE) has decreased by 29.4% incomparison with 2008 and the volume totaled2,95 billion KG Som (about US$ 66 million). Thetotal quantity of the transactions has decreased by72.8% represented by 926 transactions.In listing sector trading volume has increased on41.3% in comparison with 2008 and totaled 842.8million KG Som (about US$ 19,1 million).In non listing sector trading volume has decreasedby 41,2% in comparison with 2008 and totaled 2,1billion KG Som (about US$ 46.9 million).Trading volume of primary market totaled 1,52billion KG Som (about US$ 34,7 million), incomparison with volume of 2008 it has increasedby 69,0%.Trading volume of secondary market totaled1.43 billion KG Som (about US$ 31,3 million), incomparison with volume of 2008 it has decreasedby 56,6%.HISTORY AND DEVELOPMENTThe KSE was founded in 1994. The official openingand the first trade in stocks took place in May 1995,while the privatization process was in full swing inour country.At the initial stage of its existence and up until 2000,the KSE had functioned as a non-profit organizationwith a total membership of 16. In May 2000 theKSE was transformed into a joint-stock company;simultaneously we acquired one of the largestshareholders and a reliable partner the IstanbulStock Exchange, which has actively assisted us inimproving our activities. In 2001 the KazakhstanStock Exchange became a shareholder allowingthe KSE to significantly increase its technicalsoftware potential. At present the KSE is aclosed-type non-profit joint-stock company with 17shareholders.A significant contribution has been made by the USAgency on International Development (USAID) forthe sake of our continued development. Thanks tothe USAID, the KSE has obtained powerful financialsupport that has allowed our Exchange becomeindependent.FUTURE OUTLOOKPriorities for the KSE in 2010 are:• Transfer of government treasury bills’ circulationof the trade area of KSE• Circulation of securities of «blue chips»• Development of corporate equity market andcapital formation by domestic companies• Development of listing and market making• Development of municipal equity market• Integration with the cross markets andinternational exchanges.CAPITAL MARKET DEVELOPMENTAND ECONOMIC OUTLOOKEconomic performanceEconomic downturns in Kazakhstan and theRussian Federation (the major economicpartners) and the country’s power shortfallstook economic performance in 2009 downto 2.3% from 8.4% in 2008. Their difficultieshit the economy through reductions in threechannels: remittances from migrant workers(which constituted around 20% of GDP in2008); inflows of foreign direct investment; anddemand for exports.GDP growth was driven mainly by a robustperformance of agriculture (due to favorableweather conditions), which grew by 7.3%.Construction increased by 6.3%, after a 10.8%contraction the prior year, a rebound primarilydue to activity in the hydropower generationand mining subsectors, rehabilitation andconstruction of roads, and residential building.However, industry overall declined by 3.4%because of reduced output in the textile andsewing industry, transport equipment, electricenergy, and gas and water distribution. Goldproduction also declined.PAGE 58
FEDERATION OF EURO-ASIAN STOCK EXCHANGES ANNUAL REPORT JUNE 2013KYRGYZ STOCK EXCHANGEThe government forecasts its budget deficit at5.1% of GDP in 2010. The widening deficit is aresult of the increased budgetary allocations forthe development budget (mainly infrastructureprojects), monetization of benefits, higherpensions, and increased compensation tovulnerable groups (to offset an increase inelectricity and heating tariffs). The National Bankof the Kyrgyz Republic (NBKR) followed anexpansionary monetary policy. It reduced banks’reserve requirement from 10% at the start ofthe year to 9.5% from June; and lowered thediscount rate from 14.4% in January to a recordlow 0.9% at year-end. Although the commercialbanks’ lending rate remained almost unchanged(at about 20%), credit to the private sectorsurged by 46.5%. For the year, money supplyrose by 20.4%, carried by increased net foreignassets (reflecting the budget assistance) andthe expanded credit to the private sector.Among financial reforms, a deposit insurancescheme was launched in April 2009, coveringdeposits up to Som100,000 ($2,290). All banksare required to participate. A new law underwhich agricultural land can be used as collateralfor loan receipts was adopted on 29 June2009. In the energy sector, the governmentbelieves that the new tariff will bring the sectorto cost-recovery levels and attract privateinvestment. It has no plans for any further tariffincreases this year. The PRC made a preliminaryagreement to grant a $342 million loan for apower transmission line, which would help thecountry ensure energy security. Construction isexpected to start in 2011 and finish 2 years later.In October 2009, the country embarked ona government sector reform under which thenumber of ministries and agencies has beenreduced. The reform also envisages cutting thenumber of government employees by 30% andaims to streamline the work of government andcut other costs.Economic prospectsGDP is projected to grow at 5.5% and 6.0% in2010 and 2011, respectively. The expansionis mainly due to the expected recovery ofKazakhstan and the Russian Federation,boosting demand for exports, foreign directinvestment inflows, and migrants’ remittances—the last of which will directly bolster privateconsumption. Foreign-financed hydropowerprojects should carry on underpinningstrong construction growth, but until all thoseprojects are brought into commission (thefirst is scheduled for May), power shortfallswill continue to hamper manufacturing. Thegovernment will also provide impetus to growthas it is planning to raise spending on wagesand pensions and on infrastructure, the latterwith financing assistance from developmentpartners.The expected increase in global food and oilprices will exert upward pressure on prices,though the contracted import price for naturalgas will fall by about 10%, as will strongerworkers’ remittances. These forces will pushup inflation in 2010 and 2011, to 8.5% and9.0%, respectively. Given the large import sharein the consumer basket, the NBKR will usethe exchange rate to mitigate inflation. Creditgrowth will remain subject to the bottlenecksthat face Kazakh banks (which account for halfthe banking sector) in supplying capital to theirsubsidiaries in this country. However, increasedforeign exchange inflows may allow the NBKR toadopt an accommodative credit policy.Information obtained from the Exchange.Key Information ContactsNational Bank of the Kyrgyz Republic www.nbkr.kgMinistry of Finance www.minfin.kgThe Service of Supervision and Regulations of Financial Market of Kyrgyz Republic www.nsc.kgMinistry of Foreign Trade and Industry of the Kyrgyz Republic www.mvtp.kgCONTACT INFORMATIONContact Name Mr. Kumushbek Shamkanov E-mail kse@kse.kg Website www.kse.kgPAGE 59
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JUNE 2013 - FEAS

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