III Международная научно-практическая конференция молодых ученых и студентов «Стратегия экономического развития стран в условиях глобализации» 17-18 февраля 2012г. Том 1

Nazhmedenova D.A. Kazakhstan


One of the priorities of Kazakhstan economy development is to build balanced monetary and fiscal policies, as well as improving the efficiency of their main tools. In this area the powerful engine for further enhancement of the competitiveness of the financial sector, for ensuring its high role in modernizing and enhancing the competitiveness of the real economy, is the creation of an effective mechanism for information exchange between government agencies and institutions of the financial sector.

Kazakhstani financial sector is formed and operates under the influence of factors that create an environment, in which practice of financial sector institutions activity is generated and developed, and the degree of its impact on the real economy and its competitiveness is determined.

This work was done with the aim to show that the development of new financial instruments brings benefits to all participants of securities market and to give reasonable explanation for its evidence.

Priority in the development of the financial system is the development and introduction of new financial instruments such as index funds (ETF), the securitized assets (SPV), futures, options, Islamic instruments (sukuk, etc.) are available for a wide range of investors (both institutional investors and for individuals) [1].

Futures contract – a standard stock purchase contract (supply) of the exchange of an asset at a certain time in the future at a price fixed by the parties of the transaction at the time of its conclusion.

Futures contract is a forward contract, and as there is an urgent contract relating to a class of hard bargains. But unlike the last futures contract is completely standardized, i.e. all options, other than price, are known in advance and do not depend on the will and desire of the parties. This contract is only in the course of trading. Guarantee of its fulfillment is itself. Exchange, more pcisely, the settlement organization, which serves for trading, clearing often called organization (chamber). Conclusion futures contract on the terms of its customer called a "purchase" contract, under the seller – "selling" of the contract. The adoption of contractual obligations (under the buyer or seller) is called "open position". The elimination of the obligation under the contract by entering into reciprocal trade with the same contract is called "closing the position." When you open position of the contract holder pays the initial margin or deposit of a few percent of the contract value, which is taken into account (returning to) the liquidation of positions. If the position is (becomes) the next day (remains "open"), then it is calculated on a variable margin as the difference between the market price of the contract used for this purpose, or by so-called distribution even the prices of this and the pvious days [2]. 

An option contract – a contract, whereby one of its sides, called the owner (or buyer) is entitled to buy (sell) an asset at a specified price (strike price) up to a certain future date or on this date the other side of it, called the Subscriber (or seller), or the right to refuse to execute the transaction with the payment for these rights the subscriber a sum of money called a pmium. An option that gives the right to buy an asset is an option to buy or an option number or just call. An option that gives the right to sell an asset is an option to sell or putable. Asset, which is the basis of the option, always has two prices: the current market price or spot price and the exercise price, fixed in the option, in which the latter can be implemented. The price of the option is its pmium price rather than an asset underlying the option. Option has a duration that is limited to the date of expiration, i.e., expiration date. 

Securitization. The mechanism of securitization: the securitization of the originator (borrower-company, which produces this type of securities) sells the right to claim on its assets to a special finance company (SFA). There is a complete alienation of the assets into the favor of the special finance company. SFA is a special financial institution with a credit rating of well-known rating agencies. This places the SFA issued securities among investors. Payment of fees and principal of securities is made in favor of the SFA. For the originator securitization enables the effective implementation of its assets, while generating improved financial performance, the release of liquidity, accelerate capital turnover and reducing the balance of risks, as well as providing emitting bonds the company access to cheaper financing as securities to be placed on the market a special company that may have a high investment grade rating and therefore a lower interest rate. The investor also gets backed securities, the risks for which the most isolated risk of the originator [2].

Activation of the stock market of the Republic of Kazakhstan led to the emergence of new financial instruments for Kazakhstan, such as derivatives. When used properly, derivatives are important tools of risk management.

Today was held the work to reform and liberalize the financial market, and the list of financial instruments, which can work in financial institutions and which assets can be invested in, is being continuously revised and expanded.

The introduction of new financial instruments into the Kazakhstani capital market has become one of the priority goals according to the Strategic Plan for 2009-2011and this challenge has been committed to the RFCA, who have established prosperous conditions for its development. Working under this goal, the Agency psented the listing requirements that came into the force in June of 2011. According to the new requirements, all listed non-state securities are divided into two main groups: shares and debt securities. The positive moment of commitment of new listing requirements in that the new types of financial instruments appeared. For example, units of mutual funds, index funds, derivative securities, debt securities including securitized bonds, depositary receipts. Another benefit is that domestic and foreign investors have been provided by greater investments opportunities [1].

Introduction and implementation of new types of securities will help investors to hedge the risks. With the aim of attraction of foreign investors to the Central Asia Region the new index Renaissance Capital Central Asia Equity Index (RENCASIA) has been implemented [3].

One of the results of introduction of new financial instruments at the domestic stock market is the establishment of the Real Estate Investment Trust (REIT).

Real Estate Investment Trust (REIT) – joint-stock company, sole activity of which is the accumulation in accordance with the requirements established by the Law on Investment Funds and its investment declaration, the money made ​​by the shareholders of the company in return for its shares and assets derived from such investment [3].

Benefits from Investment in REIT:

Liquidity. Shares of Investment Trusts are daily traded on the main exchange trading markets including domestic and the international.

Diversification of Investments. REIT shows us that it is a reliable instrument of investments diversification according to the poor connection between real estate funds and other types of financial assets.

Hedge against Inflation. REIT proves us its pcise hedge against inflation: a principal source of Investment Trusts’ income / earnings is a rental fee/ payment.

High Yield. REITs show their attractiveness to investors by a high level of current yield/ income and by ensuring the possibility of a stable long-term growth of invested capital.

Reliability. The most important indicator of REIT’s reliability is the absence of the events of bankruptcy. Such Trusts shows more reliability than broker services or investment in financial instruments of large companies, because of the risk of their bankruptcy as the result of the unstable situation on international financial markets.

At the moment Kazakhstan is ready legal framework for handling major Islamic financial instruments. These tools include project financing, holding customer accounts, trust funds a client issue Islamic securities. It should also be noted features of Islamic securities – sukuk, which are analog bonds. They are issued to raise funds to finance projects. On them are also prohibited the use of interest, i.e. prohibited from guaranteeing any fixed payments. In turn, the issuer undertakes to distribute the income to be received from the project between the holders of a given government securities. It should be noted that in the world has not been a single default of Islamic securities.

With the aim of creation the favorable conditions for implementation of Islamic financing into the Kazakhstani market, the RFCA made the proposal on amendments to the current banking laws, pcisely in the part of regulation of Islamic banks and its operating activities; tax laws with the goal of reduction of the tax burden and creation of the fair competitive conditions for Islamic banks development; general amendments to the Civil Code of the Republic of Kazakhstan [1].

The last Islamic conference that took place in Kazakhstan in 2011 leaded the government of our country to the announcement of a desire to launch a $500 million sukuk, which was confirmed by the recent pss release of the Kazakh embassy in the USA. According to this release, Kazakhstan has official plans on calling $10 billion in Islamic financial transactions to market in the next 5 to 7 years. The main distinction of sukuk from Western bond is requirement of avoiding the interest payments by both of the participating sides, because it is not allowed under Shariah. Under "sukuk", the issuer sells the certificate to the investor, who rents it back to the issuer for a pdetermined rental fee at a pdetermined moment of time. In order to provide the reliability the issuer makes a contractual promise to buy back the bonds at par value at the agreed future time. The international issuance of “sukuk” in 2012 is expected to show high rate of US$35-40 billion [4].

In conclusion, we can say that the development of new financial instruments brings benefits to all participants of securities market. First of all, it is evident from the broadening of the range of financial instruments that are repsented on securities market and makes it easier for every member of the market to choose among them and to find the most suitable for him. The second important feature is the consequence of the first one, and it is the appearance of great investment opportunities for domestic and foreign investors. The last thing, which I wanted to strengthen, is connected with the fast development of Islamic securities in our country. In my opinion, this important novelty of our securities market makes us closer to international one, which today gives the most positive forecasts for the development of Islamic financing.

In this work I wanted to show the existence of wide range of financial instruments in international securities market that can be successfully applicable on the domestic one, and the first steps on this issue that were done. The following development of it, I think, is depended on the activity of direct participants of our securities market.

The list references:

1. Laws and regulations on Islamic financing from Regional financial center of Almaty [Electronic resource]. – Mode of access: http://www.rfca.gov.kz

2. Electronic resource. – Mode of access: http://www.fingramota.kz

3. Electronic resource. – Mode of access: http://centralasia.rencap.com

4. Press releases of Kazakhstan Stock Exchange [Electronic resource]. – Mode of access: http://www.kase.kz