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REGIONAL FINANCIAL CENTRE OF ALMATY CITY KAZAKHSTAN STOCK EXCHANGE KASE

REGIONAL FINANCIAL CENTRE OF ALMATY CITY KAZAKHSTAN STOCK EXCHANGE KASE. September 2010. KASE was established on November 17, 1993 under the name of "Kazakh Inter-bank Currency Exchange"

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REGIONAL FINANCIAL CENTRE OF ALMATY CITY KAZAKHSTAN STOCK EXCHANGE KASE

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  1. REGIONAL FINANCIAL CENTRE OF ALMATY CITY KAZAKHSTAN STOCK EXCHANGE KASE September 2010

  2. KASE was established on November 17, 1993 under the name of "Kazakh Inter-bank Currency Exchange" KASE is a commercial joint-stock company with 64 shareholders (as of September 1, 2010) including banks, brokerage companies, asset management companies, pension funds and other financial organizations, as well as individuals The largest shareholder is the Regional Financial Centre of Almaty city (RFCA) JSC with 12% KASE Shareholders

  3. Major events in KASE development • 1993 – first trades in foreign currency (US dollars) • 1995 – first trades in government securities • 1996 – first trades in derivatives (KZT/USD exchange rate futures) • 1997 – first trades with listed shares, state-owned shareholding and unlisted corporate securities • 1998 – launch of KASE "nego" deals system (to substitute the OTC securities market), first trades with Kazakhstan Euro bonds • 1999 – first trades with listed bonds and municipal bonds, launch of "nego" repo market • 2001 – launch of "automatic" repo market (currently the most massive and active sector of KASE market) • 2006 – first trades with foreign corporate bonds (JP Morgan and Merrill Lynch), IPO of KazMunayGas Exploration Production through the KASEsettlement system

  4. Major eventsinKASE development • 2007 – the special trading floor of the Regional Financial Center of Almaty established on the base of KASE (to attract foreign issuers and investors) • 2007 – launch of new share market index – KASE Index with numerical series of KASE_Shares Index • 2007 – KASE becomes a commercial organization • 2008 – adoption and implementation of new listing rules • 2008 – first trade in affined ingot gold futures • 2008 – launch of currency swap transaction market • 2009 – restoration of market unity through the merger of the main trading floor of KASE and STF RFCA, development and introduction of the new Listing Rules

  5. "Currency market member" category (with the right to participate in trades with foreign currencies) – 32 "Stock market member" category (with the right to participate in trades with securities, admitted to trading on KASE) – 78 "Derivatives market member" category (with the right to participate in trades with derivatives) – 7 The total number of members – 83 of which:

  6. KASE Subsidiaries • "Financial markets news agency "IRBIS" LLP - collecting, processing and disseminating information related to financial markets, including stock exchange, development and provision of information products, as well as other specialized services • "E-trade" LLP - development, maintenance and modification of software for the needs of KASE

  7. Irbis offers the following information products on the financial market: • Database for Government securities Market, non-government securities market,the foreign exchange market, either installed on PCs as a product or by providing access to the paid sections of the KASE website where this database can be found • Notification of the results of securities trading on the exchange • Financial indicators and KASE indices database • Financial market news

  8. «E-trade» offers the following key products: • Internet-trading services through the mechanism of transit orders transfer • Certification Center services while working with the trading system in remote access • Information exchange module with the trading system • The system of guaranteed delivery of messages called «eTransfer.kz» • «eDoc.kz» - electronic document management system • Hosting • Placing banners on the stock exchange website

  9. Internet-trading • Internet-trading – is the facility which helps purchase and sale securities on the Stock Exchange with use of software • The customer can always have a prompt access to trading in any commercial time to buy or sell financial instruments in the real-time • The software is installed directly on a client’s PC • Investor can respond quickly to any market changes and modify quotes through software

  10. KASE serves a wide range of markets • "nego" and "automatic" repo with government and corporate securities • foreign currency (US dollar, euro, Russian ruble) • government securities issued by the National Bank, the Ministry of Finance (including Kazakhstan international bonds) and municipal bonds • shares • corporate bonds

  11. Major indices and indicators at KASE • KASE index is the ratio of market prices of stocks in the index representative list on the date of its calculation to the prices of stocks that list on a particular date, which is weighted by market capitalization, taking into account the shares in free-float • KASE Index is recalculated after each transaction concluded with the shares that are included in the representative list. • The following shares are included in the representative list: • Eurasian Natural Resources Corporation • Kazakhmys Plc. • Halyk Savings Bank of Kazakhstan JSC • Kazkommertsbank JSC • Kazakhtelecom JSC • KazMunaiGas EP JSC 11 11

  12. KASE Index change over 3 years

  13. Major indices and indicators at KASE • KASE_BY Index - average yield index of corporate bonds included in the official list of KASE, calculated on transactions (calculated daily from July 12, 2000) • To date, the representative list consists of 154 corporate bonds issued in accordance with the laws of Kazakhstan and are listed on the Stock Exchange • Favorable developments in the securities market result in the growth of indices, whereas adverse factors lead to their fall • There are macro-economic (global crisis, inflation, changes in legislation, policy trends, etc.) and micro-economic (the conclusion of major transactions, losses of the company, etc.) factors affecting the value of indices 13 13

  14. KASE_BY Index - index of corporate bond yield 14 14

  15. Kazakhstan Stock Exchange KASE Market Structure 15 15

  16. Kazakhstan Stock Exchange Trade volumes 16 16

  17. Kazakhstan Stock Exchange Market capitalization 17 17

  18. Kazakhstan Stock Exchange Industry structure 18 18

  19. Steps for the purchase of securities on the stock exchange • Signing a client agreement for the provision of brokerage services • Opening a brokerage account to which money for investing in securities is transferred • Investor makes a decision to purchase securities • Submitting an order for the purchase of securities • Broker concludes the deal in the KASE trading system 19 19

  20. Steps for the purchase of securities on the stock exchange via Internet-trading • Signing a client agreement with broker for the provision of brokerage services • Installing an electronic trading platform on PC • Buying an electronic key to protect information transmitted by the client • Submitting an order to the broker through the trading platform for the purchase of financial instruments 20 20

  21. Exercise 1: Investor purchased a 1 year coupon bond for nominal price of 100 tenge. 10% is paid out at one time during repayment In order to calculate the profit of the investor we should make the following calculations: Yield = price * coupon(%)/100 = 100 tenge*10%/100= 10 tenge. Exercise 2: • An investor bought a bond with a 10% coupon on the secondary market with a discount from the nominal value of 25%. The nominal value of bond is 100 tenge. Duration is 1 year. Thus: • 1) market price of the purchase = 100 tenge – 100*25%/100=75 tenge; • 2) coupon yield= nominal*coupon(%)/100 = 100 tenge*10%/100= 10 tenge. • Следовательно, при погашении данной ценной бумаги номиналом 100 тенге, доходность инвестора от суммы инвестиций в 75 тенге будет равна скидка от номинала + купонный доход =(100-75) + 10 = 35 тенге или 46%. • Therefore, at maturity of the security with the nominal value of 100 tenge, the yield of an investor from the investment amount in 75 tenge will be equal to the discount from nominal + coupon yield = (100-75) + 10 = 35 tenge or 46%.

  22. Exercise 3: The investor decided to buy shares on an organized market market value of shares of Company A on 01.01.1910 amounted to 2,000 tenge per share. Market value of Company A during the sale on 01.09.1910 amounted to 2,500 tenge per share Over this period, accrued dividends amounted to 300 tenge Return on investments for the period will be calculated by the following formula = (Price + Dividends - Purchase Price) / Purchase Price = (2,500 + 300 - 2 000) / 2000 = 800 / 2,000 = 40%.

  23. What next for the stock exchange? Launch of the derivatives market – starting trades in derivatives such as futures on the KASE index, on gold, on currency, on foreign exchange swaps with longer duration period (3,6,9,12 months) The transition to a system of guaranteed payment, with T+3 calculations in order to improve the settlement system and bring it in line with accepted international standards IPO of state-owned companies on the stock exchange (Samruk-Kazyna JSC companies) Attracting a strategic investor among the recognized world stock exchanges for further technological development of KASE Development of a centralized Clearing House Joining the World Federation of Exchanges (WFE) Positioning the stock exchange as the main trading platform in Central Asian and Caspian region Introduction of new financial instruments (Islamic instruments – sukuk, Islamic securities index, Capital guaranteed notes)

  24. THANK YOUFOR YOUR ATTENTION! Address: Kazakhstan, 050059, Almaty, Kunayev str., 181 Phone: +7 (727) 244 95 00, fax: 44 65 18 www.rfca.gov.kz

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