Kazakhstan’s Temperamental Tenge Outbursts
Kazakh shares were down 10 percent on the MSCI Frontier index amid a spotty “popular capitalism” push and continued devaluation rumors dismissed as “groundless” by central bank chief Marchenko with the oil price rebound above $100/barrel versus the $90 budget assumption. A 20 percent drop to 200 tenge/dollar was speculated with GDP growth and inflation both around 5 percent, and the Chinese state petroleum company just offering $5 billion for a stake in the huge Kashagan field. The benchmark interest rate held at 5.5 percent as capital adequacy at almost 20 percent of assets continues as a lone positive banking system indicator with the aid of government support against repeated commercial debt restructuring rounds and an NPL portfolio estimated at one-third the total. In the non-bank category the dozen pension funds managing $20 billion which are key institutional investors will be pooled and placed partially under official control to aid in achieving divestitures of the sovereign wealth fund which began last year with the $400 million listing of the oil pipeline operator. An airline flotation also designed to appeal to the broader public was recently postponed over legal controversy, and many potential individual subscribers remain wary of corporate governance after fraud allegations at London-listed resources giant ENRC. The new head of the unit is a former provincial governor close to septuagenarian President Nazarbaev who celebrated the 15th anniversary in July of the groundbreaking for the political capital Astana. With no designated successor after two decades in power, he has fallen out with family members and Italy agreed to extradite his fugitive son-in-law charged with malfeasance causing BTA’s 2008 collapse. Ukrainian banks are also in trouble reflected in stock market decline and a 30 percent bad loan load, as Fitch downgraded the ratings outlook to negative on standoff with the IMF with big external repayments looming. GDP is barely growing on steep fiscal and current account deficits, and international reserves shrank 20 percent the past year to cover only two months imports as currency restrictions were imposed to maintain the quasi-peg. Winter will again underscore the toll from subsidized gas purchases and Russia’s Gazprombank credit terms could be harsher. State bills and employees have gone unpaid for months sparking protests with opposition leader Timoshenko still in jail and unable to contest 2015 presidential elections.
Slovenia has NPLs at half the level with domestic interest rates the highest in the Eurozone after Greece and Portugal at almost 5 percent. The central bank’s latest stability review warned of excessive external wholesale funding reliance and corporate leverage with little outlet through the “illiquid and shallow capital market” even with the MSCI component up 10 percent. As transfers to a separate bad bank are due to begin pending audit results acceptable to the European Commission, a wealthy Croatian entrepreneur was finally allowed to buy state-run retail chain Mercator after previous privatization tries leaving a bitter aftertaste with longstanding creditors and workers.
