Stock Markets of Russia and Kazakhstan: Real Opportunities for Interaction in Place, Yet Professional Players Prefer Foreign Markets
Almaty, 3 December 2010. The Eurasian Development Bank (EDB) published an analytical report on the prospects for integration of the Russian and Kazakh stock markets. This study conducted with support by the PARTAD provides an insight into the problems of the two countries’ interaction in this area. As part of this study, a survey of a wide circle of professional stock market players and issuers from Russia and Kazakhstan was carried out.
From the integration prospective, the most important issues are improvement, harmonisation and unification of national legal frameworks, and securing mutual access to stock markets for securities and corporations registered in the other country. These were the main questions of the survey and of the analysis of the current status of Russian and Kazakh securities legal regulations.
The study demonstrates that Russia and Kazakhstan have no explicit political or other barriers to capital market integration. Moreover, basic preconditions for mutual capital flows are all in place.
However, at present Russian and Kazakh potential issuers and professional players show little interest in integration of the two countries’ stock markets and turn their attention to foreign ones. 59% of Kazakh respondents indicate that they are not interested in having their securities listed on Russian stock exchanges, and name London as a more preferable option for placement. Hong Kong also becomes increasingly attractive. Only 12% of the respondents are keen to have their securities listed in Moscow. 29% of Kazakh respondents hold Russian securities; typically, these are being purchased internationally in the form of ADRs or GDRs.
46% of Russian respondents have Kazakh securities in their portfolios. However, Russian issuers do not view Kazakhstan as a potential country of placement. A positive development is that Russian stock exchanges show practical interest in cooperation with their Kazakh counterparts.
The experts conclude that, in such an environment, integration of the stock markets will require serious efforts for enhancing the attractiveness of regional financial initiatives and instruments in the face of tough competition from recognised financial centres.
The report states that the ultimate goal should be defined as the creation of a common Eurasian financial centre whose infrastructure elements are dispersed across EurAsEC and form a single exchange trade, clearing and settlement system. Most of these elements mayl be concentrated in Russia, due to some serious economic and technical advantages. Nonetheless, there is an opportunity for other EurAsEC members (first of all, Kazakhstan) to participate in the capital and physical infrastructure of the main institutions of such a supranational IFC.
“The common development problems of the financial markets of Russia and Kazakhstan, the growing presence of their financial institutions in each other’s markets and other countries of the region, and common activities within the framework of the Customs Union and the Single Economic Space all create preconditions for closer interaction of the national financial systems”, comments Evgeny Vinokurov, Head of EDB Economic Analysis. “Intensive economic ties between Russia and Kazakhstan open opportunities for cooperation of the national stock markets”.