And now it's time for stock market
text: Olga Steblova , exclusively for Gazeta.kz
Let us speak as ordinary folks. When we switch on the telly at night, Euronews, for instance, then apart from the news and cultural events, we normally see also information about stock markets.
Constant quotations of shares, sales and purchases, investments and bankruptcies. The word "share" has become a necessary part of any more or less serious Hollywood blockbuster.
Honey, I bought some and now they have grown up. When they say this surely they don't mean dairies or carrots. Normally, when pensioners invest their money in securities they also become shareholders. It is a real thing, but, alas, not one of ours.
The world stock market is something without which the functioning of the world finance system is unthinkable. Foreign companies get big only due to investors, who invest their money in them directly via the stock market.
Having a relatively small circulating capital, a company issues shares and attracts borrowed funds, which are much bigger than what a businessman possesses. And it is normal. While there are enough joint stock companies, issuers, investors, ready to invest money, there is no normally functioning stock market in Kazakhstan. Meanwhile our state is 12 years old already.
And now the government has decided that the stock market should be developed! How can there be a normally functioning market economy without a stock market!
Both the government and the National Bank must overcome the appearing problems and correspondingly develop the stock market lagging behind. This is what the president of Kazakhstan Nursultan Nazarbayev said last November opening the first session of the third convocation parliament. According to the president, the economy of Kazakhstan must cardinally extend the role of its stock market "as an important link of the economy that would provide an organized transfer of financial resources from potential investors to borrowers."
The head of state reminded that he had ordered to the government more than once to enhance activities directed at a development of the stock market, but "the market is still not working," - he observed.
"Not developing the stock market, we are walking on one foot and nobody can approach us," - Mr. Nazarbayev said, calling the deputies and the present government members to act more resolutely in that area.
An intention to develop the stock market was also expressed by the head of state at the IV Congress of Kazakhstani Financiers. He charged the country's financiers with seven tasks to achieve in the current year. The president of RK called the compliance of the stock market with modern standards the main task.
To fulfil this task it is necessary to carry out a whole set of measures. Measures improving corporate management and increasing the transparency of companies must be taken in the first place.
The president reminded that he ordered to the government to separate big state companies into a bloc and to pass their share holdings under the management of a specially established state holding company. It will be correct if a part of the state share holding of national companies making part of this holding will be sold at the stock market. These securities can be bought by pension and investment funds and broker companies. It means that individual investors can become shareholders as well as institutional ones, as Mr. Nazarbayev observed.
As a result, shared securities from first rank issuers will be circulated on the market and an institution of independent directors will appear in the boards of national companies, which will improve the quality of the corporate management significantly.
The president believes that it is necessary to provide new tools for the market. Project bonds are implied here in the first place. To issue them it is necessary to select several investment projects that are significant for the country. As the head of state explained infrastructural projects of the construction of railways and roads, railway stations and sea ports would suit that purpose. Bringing new investment projects to the stock market together with state development institutes, according to Mr. Nazarbayev, will allow to resolve the problem of financing for newly created production lines, give an impact to the implementation of the industrial and innovative development strategy.
For the soonest possible development of the new forms of financing for the real economy sector, for the issue of new debt tools it is necessary to pass a law on securitisation of assets. Besides, all this must be reflected in the programme of securities market development until 2007, - the president said.
The second task is to create a legislative basis for the activities of transfer agents and a corresponding infrastructure for working with the population on the stock market. The project of creating a unitary transfer agent must be fulfilled on the basis of "Kazpost".
"Apart from that a systematic explanatory and informational work on financial markets is needed with the population," - Mr. Nursultan Nazarbayev observed. Next year it is also necessary "to provide an increasing capitalisation for the banks, which will correspond with the growth of assets. Banks must enter the stock market to increase their capital. Their shares will for sure be purchased by pension funds and other investors," - the head of RK believes.
Also a modern risk management system must be introduced in the republic. "Banks and pension funds should make their risk management requires stricter. The transparency of the market should become an inseparable part of a successfully functioning market."
A number events took place in the Southern capital as a part of the implementation of programmes and presidential wishes and as a response to the necessity, caused by current realities of the economic situation, to create a normally functioning stock market.
The things started moving. The first event on the list was "The stock market of Kazakhstan: an algorithm of entering", which was carried out in Almaty in early February. The problems and the ways for their resolution were discussed by representatives of the banking sector, the state, and the private business.
Amendments in the legislation on joint stock companies became the central theme for discussion. Changes in the legislation are planned to be introduced in four directions: the detailed definition of specific responsibilities for breaking the law on national securities, "technical changes" in the normative legislation, improvement of corporate JSC management, and protection of shareholders rights, as well as liberalisation of the licensing system.
Amendments concerning the protection of investors rights for information and establishment of possible criminal responsibility will help to protect the investors rights. The "technical changes" will deal with the detailed definition of re-registration procedure of a JSC as a LLC and an opportunity that an independent register to maintain the list.
The corporate management principle will be further bolstered due to the maintenance of the protocols of the meetings and to the distribution of authorities between JSC bodies. By the way, the draft code of corporate management was discussed already in February at the first meeting of the national council of issuers. Nurlan Tokobayev, director of securities market department, Financial Control Agency, spoke about amendments to the law at that even as well as at a council meeting.
The tendency towards transparency popular this year has already reached the stock market. Transparency is necessary for further development of the national securities market and provision of adequate competition, Maulen Utegulov, director of State Borrowing and Crediting Department believes.
The scales of investments should be changed, the volume of people's savings should be increased, and the securities market should be controlled adequately. The following directions should be taken: the development of the state securities market, an increase of the crediting terms to 10 and more years, creation of a state holding company for the non-state national securities market, further capitalisation in compliance with the innovation development programme, the improvement of the corporate management, the financing of projects.
Creation of an alternative financing fund and issue of infrastructural bonds are also possible. At the expense of the latter money is supposed to be attracted, whose guarantor will be the state. The temporarily accumulated funds will be provided for all who will wish.
There are not enough financial tools on the market either. Many companies don't see any attractiveness in calling themselves JSC and in opportunities they gain from it. Apart from that not all of them have switched to the international financial reporting standards (IFRS), there are interior conflicts in the companies. The role of financial consultants was discussed as well. The latter would increase the level of confidence in issuers and investors. Their task is to orient the client correctly and to describe advantages. But it is just one side of the coin, the second one was observed by businessmen, the same JSC without which the life of national securities would be impossible. The problem for JSC is the lack of investors confidence in the companies whose securities are on the B listing - that is in the companies that need funds, but are not qualified enough for the А listing, providing "guarantees" for the investors. Businessmen don't understand why it happens, because in the majority of foreign countries the stock market operates exactly to support business beginners.
The discussion of the stock market problems was continued by the Financial Control Agency of the republic, the association of financiers of Kazakhstan, issuers and other representatives of the stock market in the end of February at the first meeting of the Council of Issuers of Kazakhstan. That body was created in the end of the last year by the Agency of RK for Regulating and Supervising Financial Market and Financial Organisations.
How can the securities market be improved and its participants be helped? The participants have defined its status - a consultative organ. Representatives of the issuers, whose securities were included in the stock exchange list and representatives of the Financial Control Agency, the Association of Financiers of Kazakhstan, "Kazakhstani Stock Exchange" JSC, "Kazakhstani association of registration list holders", and the joint stock society "Central depositary of securities".
The council must consult participants of the securities market on allocation and circulation of securities. It will become independent and democratic under the Financial Control Agency. The meeting was in favour of that form.
At the first meeting representatives of banks, joint stock companies were resolving issues, related with the adoption of the Corporate Management Code, which was very important for the securities market participants. However, the biggest part of their time was dedicated by the meeting to amendments to the law on JSC to be adopted. The meeting participants were very concerned with the legislative basis on which they would have to work.
The Corporate Management Code was under preparation for a long time. First around 200 amendments were passed, but even in that version the code is only under consideration. The first attempt to introduce this document was made 5-7 years ago and since then many things have changed. And if then many JSC took it into consideration, now it is obligatory for the so called people's JSC as per the law, and it will be obligatory for the companies on the А listing, thanks to the Financial Control Agency.!
"Each joint stock company will accept norms of the Code independently, but we suppose that norms of the Code, will allow all issuers and joint stock societies to take common approaches towards the system of corporate management," - Bolat Zhamishev, chairman of the Financial Control Agency, said.
The biggest part of the two hour meeting of the council was dedicated to amendments in the law. They were addressed to the Financial Control Agency.
Responsibility, rising fines, affiliated transactions, project and infrastructural bonds, and many other things - this is what concerns JSC representatives. But the Financial Control Agency was not in a hurry to give comments on all questions, responding only to several of them. Fines and criminal prosecution will be used only in the cases of serious offences. It is being done in order to prevent in the future such actions on the part of JSC and state officials.
All because "there can't be a market without issuers. But there can't be a market without investors either. And what is acceptable for the issuer, is not always acceptable for the investor." This is what the chairman of the Financial Control Agency said.
Everybody went away unsatisfied, because many things remained unclear. Not all questions were answered either. However, and interest towards the securities market is obvious. Each time there are more stock market representatives of all levels. Big and small companies are ready to play a role of both issuers and investors.
The state is also interested and it has shown it. So why wait? Maybe a real attempt will become successful for this part of the financial market, as in the case of the Corporate Management Code's introduction.
Maybe it all depends on time? But that's the point - it has come!
Also in the "In Depth"
09.01.2013 2012 marked by multiple events in Kazakhstan