Key Takeaways from Deputy Chairperson M. Khadzhiyeva at KASE

Dear colleagues!

I would like to thank you for the invitation to this Conference and take this opportunity to congratulate the KASE and AIX exchanges on joining the Tabadul digital hub.

This event is not only a milestone in development of the capital market of Kazakhstan but also opens up new prospects for the entire region of Central Asia and the Middle East.

I am confident that today's event will expand our horizons for interaction, create a solid foundation for successful cooperation and have a positive impact on liquidity of our markets.

The financial sector plays an important role in stimulating the economic growth of the country. Total assets of financial institutions accounted for 55% of the GDP reaching $134 billion.

The securities market of Kazakhstan also demonstrates a steady growth and has a reliable infrastructure that creates conditions for further development.

Over the past five years, the stock market has grown by 40%, and its capitalization has reached $63 billion, which is 26% of the country's GDP. Total volume of issued corporate bonds has reached $26 billion, making 11% of the GDP.

On average, around 30 new issuers of shares and bonds enter the market every year. And the total number of instruments in the KASE trading list has reached 1,904.

Expansion of banks' opportunities to be present on the stock market has entailed a significant increase in retail investors, and number of their accounts has reached 3.5 million.

Today, the main institutional investors are banks, insurance organizations, the Unified Accumulative Pension Fund and endowment funds, with their investment portfolio reaching $63 billion.

All this indicates the potential of the domestic investor base to absorb significant investments.

This is also evidenced by a high interest from the local investors in the IPOs of national companies KEGOC, Kazatomprom, KazMunaiGas and Air Astana that took place over the past few years. Domestic demand exceeded supply by 1.5 to 2 times.

We continue our active efforts to improve liquidity of the stock market and, as a result, to raise Kazakhstan's positions in the FTSE and MSCI ratings to the level of "Emerging Markets".

The Privatization Program for Major State Enterprises has this in its focus. This year, it is planned to hold IPOs of three more state companies – KTZ, QazaqGaz and Samruk-Energy.

Moreover, various levers of state support are being considered to stimulate companies to go public, as well as to increase the share of domestic securities placements from 20% to 50%.

Speaking about stock market infrastructure, a complete upgrade of trading and clearing systems has been carried out. The clearing and central counterparty functions were allocated to a separate organization – KASE Clearing Center with a capital of almost $19 million. This will make it possible to provide central counterparty services not only for KASE instruments but also for other exchange and over-the-counter markets, including commodity exchanges.

In 2024, the British rating agency Thomas Murray assigned the Clearing Center an A+ rating. This rating is assigned to top 30 central counterparties in the world.

Moreover, functionality of the Central Depository (CD) has been significantly expanded. Today, the CD is a regional accounting and settlement hub with a full range of depository and banking services, including currency exchange services and opening accounts for individuals. Last year, an over-the-counter OTC platform was created based on the CD.

In order to ensure a high level of integration of the infrastructure of the Kazakhstan stock market into the ecosystem of global capital markets, the CD has established strong correspondent and inter-depository ties with 56 foreign depositories and custodians.

In order to enable global custodians such as Euroclear and Clearstream to carry out transactions on the domestic market of Kazakhstan, the right of banks to act as intermediaries and manage accounts of settlement organizations in the Central Depository has been established.

Today, it can already be stated that the infrastructure of the stock market complies with the best practices for regulation the activities of infrastructure organizations, including the IOSCO standards.

According to results of the FSAP assessment conducted in 2023 by experts of the World Bank, the regulation and infrastructure of the stock market of Kazakhstan was marked as "Solid".

As for the Agency's plans. First, we have developed a Draft Law on Rating Activities, which provides for establishment of a National Rating Agency. This will expand the opportunities for companies in various sectors of the economy to receive independent and affordable rating services, ensure economic security and independence from market conditions and geopolitics.

Second, to develop the collective investment market, a new draft Law on Investment Funds has been developed, which is designed to expand investment opportunities of funds, liberalization of their activities and creating new forms of investment. The draft law was broadly discussed with the professional community and international development institutions.

It is planned to submit both laws to the Parliament this year.

In the future, a Law on Clearing Activities will be also developed based on standards of the European regulator ESMA.

Third, one of the Agency's priorities is development of Islamic finance. Currently, work is underway to develop a new Law on Banks, within which approaches to open Islamic banks will be changed. Today, we have successful examples of cooperation with the Arab countries. Abu Dhabi Commercial Bank and a subsidiary of Qatar's Lesha Bank operate in Kazakhstan's jurisdiction.

Another trend is digitalization. The Agency pays special attention to introduction of digital technologies in the financial market, including artificial intelligence, blockchain, and Open API technologies.

Conditions have been created for development of financial ecosystems and marketplaces, possibility of remote entry into contracts, opening and management of accounts using KYC procedures is provided for.

To date, implementation of the Open API information exchange system in the banking sector has been completed. Similar efforts are planned for the stock and insurance markets.

Together with the National Bank, the Agency is working to create a legal framework for issue of digital assets. In the near future, it is planned to launch several pilot projects on tokenized instruments.

We look forward to enhanced cooperation with member countries of Tabadul Digital Hub in order to ensure a mutual access not only to the securities market, but also to digital asset trading.

Our cooperation will contribute to creation of a more flexible and innovative financial ecosystem, providing all participants with new investment opportunities.