Tell Yerasyl: Kazakhstan plans a Sid-style sell-off

    By Elizabeth Pfeuti, Dow Jones
    Under a plan entitled The People’s IPO, Kazakhstan wants to sell both to state pension funds and retail investors as an initial move to create an investment culture among individuals.
    The programme is to go live next year, but as yet, the government has not disclosed what will be put up for public ownership, the value of those assets, where the investments will be listed, or whether domestic pension funds and individuals will be able to buy into the asset simultaneously.
    The government has said that the first tranche of an offering will be to pension funds to which Kazakh citizens are obliged to contribute 10 percent of their salary. Kazakhstan has had a national stock exchange since 1993 and lists several energy and mining companies, but it is a relative minnow on the world stage with a market capitalisation of about US$ 55billion.
    Marcia Favale, a former UBS banker and Brevan Howard portfolio manager, has been advising Prime Minister Karim Massimov and the sovereign wealth fund Samruk-Kazyna, which owns the assets likely to be part of the sale.
    Favale told Financial News: “The IPO programme is to be used to usher in structural economic change and provide a conduit of wealth creation to the population of Kazakhstan. “Kazakhstan is in a position of economic strength; it is not taking these assets public because it needs the money to plug a fiscal hole as is typically why countries undertake privatisations.”
    The ideology behind The People’s IPO is similar to that laid out by the Thatcher government. The Kazakh authorities want the public to be involved in the stock market to encourage an investment culture in the country that will spur development of the stock market.
    Favale said: “The retail market is not developed in Kazakhstan and the government wants this to change. We want to get the local banks involved in The People’s IPO process, to then leverage the expertise, to launch new, hopefully private, companies in the future. “One of the longer-term aims is for Kazakhstan to be an investment destination for foreign investors that want Kazakh and/or regional exposure.”
    International financial institutions have leant their support to provide guidance on what needs to be done to bring the country’s markets in line with the very best around the world.
    Citigroup, UBS and PriceWaterhouseCoopers are three of the big names that are advising the government on the project.