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Tenge devaluation: Upside and downside

12 февраля 2014, 16:59

Kazakhstan’s tenge exchange rate set by the Central Bank may reach KZT 197-201 for USD 1, Saken Usser, Head of Corporate Clients Department at Freedom Finance investment company, told a Tengrinews journalist.

According to him and other respondents, some preconditions for the tenge devaluation had been there for quite a while.

“The current exchange rate set by the National Bank at KZT 185 for USD1 is not the utmost ceiling. The pressure on the tenge is set to further grow. It’s just a matter of time. Actions the National Bank may take are hard to predict. The sharp devaluation will have a positive impact on Kazakhstan-based commodities companies. With the sales revenues in US Dollars, such companies as London-listed Kazakhmys copper miner, KazMunaiGas Exploration and Production will see their quarterly reports substantially exceeding expectations. All Kazakhstan-based London-listed companies such as KCell, KMG EP, Halyk Bank will see their shares surge by 5-15% as early as today”, Mr. Usser believes. He advises to buy USD-denominated shares of the companies at the LSE. It is fair to note that February 11 all the companies’ shares surged by 8-22%.

Saken Usser. Photo courtesy of kursiv.kz

Saken Usser. Photo courtesy of kursiv.kz

“The move took into account the scarcity of the National Bank’s resources to maintain a certain exchange rate of the tenge (…) the effect on the overall economy of Kazakhstan throughout the year will be positive as Kazakhstan still relies on commodities exports”, he believes, adding that the Russian ruble’s weakening had a certain impact on the tenge devaluation. However, the tenge is a more manageable currency than the ruble, he believes. “Within the Customs Union of Kazakhstan, Russia and Belarus the move is a positive one, a preventive measure”.

Yerlen Badykhan, a senior analyst with the Agency for Returns on Investments, believes the currency devaluation expectations had been there for the last year and half. “Experts had been talking of gradual depreciation to KZT 160-165 to USD1 [from KZT 155 to USD1]; much more so given the crawling devaluation. Nobody expected such drastic changes, excluding the circle of informed ones. They are easy to track through USD transactions made throughout the week prior to the decision on devaluation”, he said, giving no details.

“The promises made by the Central Bank Governor that there would be no currency devaluation and that the situation was under control are still fresh in our minds. With growing FX revenues in mind, official sources claim the devaluation is a good for a commodities exporter like Kazakhstan. However, the revenues will have no impact on the overall wellbeing of common people”, he said.

Erlen Badykhan. Photo courtesy of 1in.am

Yerlen Badykhan. Photo courtesy of 1in.am

According to him, the measure will entail sharp hike of prices for all consumer products and growing debt burden on families that have taken USD-denominated bank loans. “When it comes to petrol, the country’s Oil and Gas Ministry has promised not to raise prices for petrol in the Q1 2014. However, Kazakhstanis have witnessed that promises don’t matter much in Kazakhstan”.

FX expert Anatoly Khegai believes there will be sizeable hikes of prices for imported goods. “According to official estimates, the inflation rate is expected at 7-8% at the end of the year; however, the actual figure might turn out to be much higher”, he said.

Anatoly Khegai. Photo courtesy of inform.kz

Anatoly Khegai. Photo courtesy of inform.kz

According to Damir Seisebayev, Director of the Research Department at Private Asset Management, some preconditions of the currency devaluation had been there for a long time. “There had been signals from Russia, with the Russian ruble having a “fever”. Some emerging nations have had their currencies devalued”. He believes the sharp devaluation caught many off guard and there might be some speculations. However, the exchange rate at FX exchange outlets wouldn’t be drastically different from the rate set by the National Bank, he said.

Damir Seisebayev. Photo courtesy of Ism.kz

Damir Seisebayev. Photo courtesy of Ism.kz


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