Those in the waiting room for a raft of big Kazakh initial public offerings (IPOs) have endured a torturous wait to date, and things appear to have got that much more frustrating with news that Kazakhstan has postponed plans to float shares in state-owned oil company KazMunayGaz (KMG) to beyond 2019.
Reuters on February 8 quoted two banking sources as saying that was the case.
The decision to postpone was reportedly driven by worsening market conditions amid a lack of investor appetite for stock offerings. Investors, it seems, are being put off by market uncertainties generated by the ugly combination of Brexit, US political tensions and the US-China trade war, along with the ongoing sanctions campaigns against Russia and Iran and the global economic slowdown.
First in many years
Kazakhstan’s first IPO in many years, featuring state-run uranium producer KazAtomProm, took place on the London Stock Exchange (LSE) and the Astana International Exchange in November. The offering did not seem to go as well as Kazakh authorities made out, however. The outcome involved Kazakhstan’s state-run pension fund buying one-third of the 15% stake floated on the LSE.
In September, the Kazakh government invited international investment banks to pitch for roles in listing KMG in London.
In October, Royal Dutch Shell backed out of plans to buy a stake in KMG. The decision came following a due diligence process which included discussions on corruption risks at the company relating to the informal control over the company exercised by Kazakh President Nursultan Nazarbayev’s son-in-law, Timur Kulibayev.
Kazakhstan hoped to sell small stakes in some of its largest state run companies ahead of its planned IPOs for 2018-2020, in order to make the companies more attractive to foreign investors.
KMG’s potential valuation, according to banking sources, could stand at approximately $6bn. The company accounts for 28% of total crude oil and gas condensate output in Kazakhstan.
Other names on the Kazakh government’s privatisation list are national carrier Air Astana and soon-to-be near monopolist of the local telecoms market Kazakhtelecom.
In hope of drawing in liquidity to the newly launched Astana stock exchange, the government wishes to also partially list the firms domestically. The government hopes to provide a boost to its Astana International Financial Centre (AIFC), where the bourse is located. The AIFC was officially launched in December 2018. It is designed to become a banking and trading hub for all of Central Asia.
Kazakhstan’s capital market may go through major change in 2019 having been hooked up to the Clearstream international settlements system in July 2018. Russia made a similar reform in 2012 and saw foreign investors flood into its bond and stock markets.