Astana International Exchange (“AIX”, “Exchange”) is pleased to present its results for 2022.
Since the very beginning of 2022, the global markets faced a very turbulent year with multiple challenges and increased risks, which influenced the economy of Kazakhstan as well. But despite the aggravation of geopolitics and the macroeconomics uncertainty, AIX continues to demonstrate resilience in adapting and contributing to projects that will define the future of the country. Among them: implementing the State Privatization Program, developing the local retail investors base and expanding the product range to satisfy the growing demand of investors.
There were several factors throughout the year which had a negative effect on Kazakhstan’s investment climate and led to a decrease in the value of local securities as well as lower trading volume on the AIX.
President Kassym-Zhomart Tokayev assured foreign investors that the Government will ensure a stable investment climate and meet its commitments to investors. Broad political and economic reforms were announced in March 2022 to bring positive changes to the country’s investment climate by increasing privatization and combatting corruption.
AIX results as of 31 December 2022:
- The monthly trading volume in December 2022 increased significantly due to the IPO of the national oil company KazMunayGas and reached $35.4 mln which is 2.5 times more than in December 2021. The trading volume for the entire 2022 amounted to $173mln.
- The official AIX list includes 129 issues of securities of 85 different issuers, including 19 ETNs (Exchange Traded Notes).
- Debt capital raised amounted to about $2.39 bn, and of equity capital equaled $348.9 mln.
- 30 trading members, including brokers from Kazakhstan, Russia, China and European countries.
- More than 500 thousand investor accounts in the AIX Central Securities Depository (AIX CSD).
IPO of KazMunayGas
Trading in ordinary shares of the National Company KazMunayGas, the leading vertically integrated oil and gas company in Kazakhstan, started on the AIX on December 8, 2022.
About 96% of IPO allocation went to the domestic retail and institutional investor base. We consider the participation of retail investors via the direct subscription solution achieved via Tabys mobile app and the branch network of JSC “Kazpost” as a great achievement – almost 6,000 applications amounting to more than KZT1 bn were received. The tool for the submission of IPO bids by retail investors directly to the selling shareholder in an IPO through a mobile application was used for the first time in the history of the stock market in Kazakhstan.
KMG shares have been included in the AIX Qazaq Index as of January 4th, 2023, as they meet eligibility criteria and demonstrated high liquidity since the IPO.
Major placements on AIX in 2022:
- 3-year debut Bonds of JSC Halyk Bank Georgia, the subsidiary of JSC Halyk Bank, in the nominal value of US$15 mln with fixed coupon rate of 4 per cent p.a. and maturing in 2025. The issue represented the first tranche of the US$45 mln Bonds Programme registered with AIX.
- Exchange-traded notes:
- iX China Equities BR Exchange Traded Notes – first RMB denominated ETNs with the shares of iShares MSCI China A ETF (“CNYA”) as underlying asset. CNYA – one of the largest ETFs providing exposure to the performance of equity market in China.
- iX Islamic Exchange Traded Notes with the shares of iShares MSCI World Islamic UCITS ETF (“ISDW”) as underlying asset. ISDW – one of the largest Islamic funds with investment made exclusively in Shari’ah compliant securities.
- iX US Real Estate Exchange Traded Notes with the shares of Vanguard Real Estate ETF (“VNQ”) as underlying asset. The VNQ ETF has interest in over 160 companies that own real estate around the world (US, Canada, Europe and Asia) and includes large-, mid-, and small-cap Real Estate Investment Trusts (REITs).
- Debut public bonds of Nef Qazaqstan in the amount of KZT6bln, coupon of 20 per cent and maturing in 2023. Nef Qazaqstan’s payment obligations under the bonds are guaranteed by one of the largest developers in Turkey, with a global growth strategy.
Retail investors
Throughout 2022 we have seen an exponential growth in the number of retail investors opening accounts in the AIX CSD. Investor accounts increased by more than 3 times compared to 2021 and reached 505 thousand. An impressive number of over 50 thousand accounts were opened on the eve of KMG’s IPO.
The volume of investments through the Tabys mobile app at the end of December 2022 amounted to more than $3 mln compared to $2.7 mln as of the end of December 2021, and the trading volume over the past 12 months reached $3.5 mln compared to $4.7 mln in 2021. The number of active investors in the Tabys application hit 11 thousand individuals.
New tools and services
- AIX timed the launch of the Direct Subscription platform for the IPOs in the framework of the Privatization Program of Samruk-Kazyna Fund to the listing of KazMunayGas, providing equal access to all citizens of the Republic of Kazakhstan.
The Direct Subscription is a new digital solution that eliminates paperwork and gives Kazakhstani nationals ample opportunities to subscribe for shares in national companies. The direct subscription is available through Tabys mobile application and/or Kazpost network throughout Kazakhstan.
- AIX launched the repurchase agreement (repo) trading which allows market participants to trade and conduct repo transactions in USD-denominated equities. The repo market is initially available in equities of Kaspi, Kazatomprom and Halyk Bank for durations ranging from overnight to 4 weeks.
It offers greater opportunities for local retail investors and trading members and opens our capital market to a wider number of market players, increasing the overall liquidity and transparency on the AIX. AIX is committed to meeting our retail customers’ demand and the creation of the repo market will facilitate its continued development and growth.
- AIX has provided the local business community with yet another quick and cost-effective way of raising working capital – Commercial Papers. The relevant changes have been introduced to the AIX Markets Listings Rules.
Commercial paper is a commonly used type of unsecured, short-term debt instrument issued by companies with proven creditworthiness and typically used for financing of the issuer’s short-term working capital needs (payroll, accounts payable, inventories, other operating expenses related to core activities of the issuer).
Commercial paper may be offered to professional (accredited) investors in any denomination. Given that offers are directed at Accredited Investors, it will be issued in lots of at least US$100,000. Other corporates, financial institutions, high net worth individuals, and money market funds are usually buyers of commercial paper.
- From 5 December 2022, the range of responsible financing products on AIX was expanded by introducing a new chapter to the AIX Business Rules on issuance and listing of ESG-Labelled Bonds using “open architecture” structure. This structure gives flexibility to issuers to attract responsible financing for their sustainability-linked projects through a wider range of instruments under internationally recognized standards. The ESG-Labelled Bonds may include social and sustainable and other ESG-labelled bonds such as blue bonds, transition bonds and sustainability-linked bonds on AIX.
- AIX trading fees (which is a full-service commission also including the settlement service) were amended with effect as of 1 December 2022. The trade and settlement fee for equity (including Exchange Traded Funds (ETFs)) will be 0.01% (previously 0.05%) of the traded value.
Also, trading and settlement fees for “NC KazMunayGas” shares were waived entirely for the period from December 08, 2022, until March 07, 2023 (inclusive).
The AIX CSD fees for External Transfers for the common shares of KMG were waived for a period of 3 months effective from December 7, 2022, till March 6, 2023 (inclusive).
- Citibank Kazakhstan JSC has become a Participant of the AIX CSD, thereby allowing international institutional investors to hold their assets at the AIX CSD under the bank’s custody.
International cooperation
- AIX Central Securities Depository and Euroclear Bank launched a new Enhanced Settlement Service. Under the arrangement, institutional investors can settle trades in Euroclearable securities admitted to trading on AIX either in a Euroclear Bank account (if both members of Euroclear Bank and AIX) or via a custodian account at Euroclear Bank. The new service offers international investors greater costs efficiencies as these trades can now settle directly in Euroclear’s multi-currency environment.
To participate in the Enhanced Settlement Service, interested market participants must provide a Power of Attorney to Euroclear Bank that AIX CSD has a right to send settlement instructions regarding their account at Euroclear Bank.
- Thomas Murray, the global post-trade risk and custody rating agency, upgraded the AIX Central Securities Depository (AIX CSD) to an overall risk assessment of ‘A+’, which denotes a ‘Low Risk’, up from ‘A’ in its initial assessment in 2020.
The overall assessment of ‘A+’ reflects the weighted average of the eight individual risk components and indicates a low-risk exposure profile with ‘Stable’ outlook. This grade places AIX CSD above the average for Eurasian CSDs (BBB) and at the same level of the average for Asia Pacific CSDs (A+) covered by Thomas Murray.
- AIX confirmed its compliance with global standards ISO 27001 and ISO 27032 through recertification and has also met the requirements of two new standards, ISO 27018 and ISO 27017. These standards cover assurance of the full business cycle, including trading, clearing, settlement, depository, and registry. The certification process that AIX regularly goes through demonstrates our commitment to providing a strong foundation for information and cybersecurity systems and building confidence in the quality and security of our services. The certifications were issued after a rigorous audit and review by the Israeli Standards Institute, giving maximum assurance to stakeholders that their information is protected in the most comprehensive manner.
- Following the signing of the Memorandum of Understanding in October 2021 between the AIX and the Abu Dhabi Securities Exchange (ADX), the two exchanges announced that officials from both financial markets met to define the areas of mutual collaboration further and target immediate next steps in a clear direction commitment to achieving the goals of the MOU. The two market aim towards initiating mutual introduction to facilitate bilateral direct market access (DMA) links between brokers allowing AIX brokers to access ADX and vice-versa. Establishing simplified central securities depository (CSD) links is considered to pave the way for cross-listings of ETFs and fixed income securities. Additionally, collaboration in the field of Shariah-compliant exchange-traded products is also of particular interest to both exchanges.
- The AIX and the Saudi Exchange signed a Memorandum of Understanding (MOU) and agreed to establish cooperation in mutually beneficial areas. Under the agreement, both parties will facilitate exchange of data and research in FinTech, explore the collaboration in development of the sustainability and environmental, social, and corporate governance (ESG) fields, share ideas on educational, IR, exchange products and other matters.
- The AIX also signed a Memorandum of Understanding with Qatar Stock Exchange (QSE) to establish information and knowledge exchange regarding market operations within the respective legal and technical framework, joint research and educational initiative. Via QSE, one of the hubs for Islamic Sukuk in the world, AIX is to bolster its involvement in developing and promoting Islamic finance through sharing information and expertise pertaining to its activities.
Reference:
AIX was formed in 2017 within the Astana International Financial Centre development framework. AIX shareholders are AIFC, Goldman Sachs, the Shanghai stock exchange, the silk Road Fund, and NASDAQ, which also provides the AIX trading platform. The exchange operates within a regulatory environment based on the principles of English Law, thus providing a reliable investment environment. The mission of AIX is to develop an active capital market in Kazakhstan and the region by providing clear and favorable conditions for attracting financing to private and public businesses. AIX develops special segments for mining companies as well as infrastructure projects under the Belt and Road initiative. More details:www.aix.kz
The Astana International Financial Centre (AIFC) is an independent jurisdiction that started operations in 2018. In accordance with the Development Strategy until 2025, the key focus of the AIFC is to consolidate as a universal platform connecting the countries of the EAEU, Central Asia and the Caucasus. www.aifc.kz