Kazakhstan’s Harried House Cleaning Claim
Kazakhstan equities tried to end their MSCI frontier index loss following a sovereign ratings downgrade and bad loan uptick toward double-digits, as foreign exchange-denominated mortgage holders demanded post-tenge devaluation compensation in rare public displays challenging President Nazrarbaev’s policies. His Nur-Otan party again got 80 percent of votes in recent parliamentary elections, as the allowed opposition won half a dozen seats in the 100-member chamber. Even with an oil price bump recession will linger this year, especially with lethargy in China taking one-fifth of exports. Kashagan field production will not notably expand until 2017, as the state and foreign partners still haggle over contractual obligations. The IMF weighed in with a gloomy near-term Central Asia forecast on the 25th anniversary of independence for both commodity suppliers and buyers, with the high-single digit typical growth rates associated with post-communist takeoff a distant memory. It recommended a new generation of structural reforms and diversified consumer and industrial push but acknowledged worker skills and technology handicaps and higher unemployment risk with migrant return from Russia as Western trade and financial sanctions stretch another year. However the Kremlin may be hedging its bets as President Putin praised likely US Republican Party nominee Trump as a future counterpart after the candidate voiced his own admiration. A close advisor to the contender was a political consultant to ousted Ukraine leader Yakunovych and other regional authoritarians. Oil ties have sustained the bilateral relationship between Washington and Astana, but recent diplomatic developments with neighbors suggest future fraying. Azerbaijan’s President Aliev was greeted with a cold shoulder on an April visit, and Kyrgyzstan’s prime minister was forced to resign after offshore account revelations from the “Panama papers” raised international ire.
Ukraine shares improved in contrast with cabinet reshuffling, with an ally of President Poroshenko slated to succeed Prime Minister Yatsenuk, who failed to muster domestic or foreign confidence and unlock the next $1.5 billion slice of IMF funding. Finance Minister Jaresko, a former fund manager who negotiated the sovereign bond restructuring with payment delays and reductions, also left as high-profile corporate borrowers like DTEK tabled their own creditor deals. Output collapsed 10 percent in 2015, but industrial and retail activity has turned positive and with a good harvest could restore growth. The central bank lowered the benchmark interest rate to 20 percent with kinder inflation and devaluation, and has won development lender kudos for a tough stance on regulation and consolidation closing dozens of institutions.
Mongolia looked to avoid both Russia and China sway with a new India financing arrangement on preparation for June elections, where investors favor Prime Minister Saikhanbileg’s Democratic Party. He barely overcame a no-confidence motion after approving the $4.5 second phase development of the giant Oyu Tolgoi mine, due to launch in coming months and catalyze further FDI. Capital goods imports for the project will continue the balance of payments deficit, as growth halves to a projected 1 percent in 2016. The opposition People’s Party may again campaign on an anti-mine and hefty social spending platform, as weak consumption reflected in banking and property setbacks prompts populist herd instinct.
