Custom Search

Wednesday, September 24, 2008

Kazakhstan Plans Paulson Style Bailout: Borat?

What have you done Borat?

I can't believe it! Kazahkstan plans to implement their very own Paulson bailout. Those crazy Kazakhstanis!

Insanity is a virus.

Those of you still betting on some kind of decoupling are just absolutely nuts. This thing is huge. This thing is global. Nothing and nobody is immune.

Kazakhstan Plans Paulson-Style Rescue Fund for Riskiest Banks: "Kazakhstan's government, grappling with a credit squeeze that has cut economic growth by half, is working on a $5 billion rescue fund to buy distressed assets from its banks.

The central Asian country's banks will be able to swap their loans for bonds that are "partially guaranteed by the government,'' Kazakh Finance Minister Bolat Zhamishev told a banking conference in the financial capital Almaty today. The government will set up the fund "as quickly as possible'' and keep it in place for at least three years, he said.

Kazakhstan's banks have a bigger default risk than any in Europe or Asia, based on the cost of credit-default swaps for BTA Bank, the country's largest lender. Banks raised their bad loan provisions by 42 percent in the first eight months of this year amid a slump in the value of property assets that back more than a third of their clients' debt, according to the Financial Supervision Agency.

"The Kazakh plan is similar to the U.S. plan'' to buy bank assets, said Ekaterina Trofimova, a Paris-based analyst for Standard and Poor's, said in an interview in Almaty. "In these circumstances there aren't many roads to salvation.''

President Nursultan Nazarbayev ordered the government to create the fund earlier this month and the government said on Sept. 12 it would invest about $1 billion. Local units of Citigroup Inc., Deutsche Bank AG, Credit Suisse Group AG and Renaissance Capital took part in a government meeting on the fund last week, the Financial Supervision Agency said on its Web site.

Paulson Plan

Like the $700 billion U.S. rescue plan advocated by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, the Kazakh government will avoid paying banks discounted prices for their loans, basing the swaps instead on the stated "book value,'' Zhamishev said. Bernanke said yesterday that the U.S. government won't pay "fire-sale prices'' under its plan.

The Kazakh bonds that are offered in exchange for distressed bank assets may be split into three portions or tranches. The risk of losses from the lowest tranche will be assumed by the banks, Zhamishev said. The banks may be allowed to resell the top tranche to investors.

"It wouldn't be reasonable to sell these bonds to investors at this point,'' Zhamishev said, adding that banks should wait until market conditions are "favorable.'' The amount of bonds issued by the fund will depend on the assessed value of banks' distressed assets, he said.

Default Risk

Lenders have been battered by the end of a construction boom fanned by Kazakhstan's oil-led economic growth at 10 percent a year since 2000. The $100 billion economy grew 5.4 percent in the first half of 2008 as banks curtailed lending because of the global credit crunch.

Net income at Kazakhstan's 36 banks has fallen 47 percent this year as lenders put aside more money to cover bad loans, the Financial Supervision Agency said in a statement.

"The fund will help to increase investors' confidence in the quality of bank loan portfolios,'' Zhamishev said.

The cost of protecting bonds sold by BTA Bank from default jumped by 118 basis points to a record 1,463 basis points today, according to prices from CMA Datavision. That means it costs investors $1.46 million a year to protect $10 million of the Almaty-based lender's debt for five years. The cost is higher than all three of Iceland's largest banks.

Credit-default swaps, financial instruments based on bonds or loans, were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default. An increase indicates a deterioration in the perception of credit quality.

The Kazakh bailout plan is a "positive" step, S&P's Trofimova said."

The only thing I know about Kazakhstan, is that Borat lives there.

I decided to find out a little about how their markets have been performing of late. From the Kazakhstan Stock Exchange site I learned that the KASE index "is the ratio of included into the representative list shares market prices at the list development date to this list shares prices at a certain date, weighted on capitalization considering free floating shares. KASE Index is recalculated after each deal concluded on shares, included into the index representative list."

WTF? Click here to see for yourself.

Apparently they entire exchange was founded in 1993 and only lists a few dozen companies. That's what Wiki says.

18 comments:

Anonymous said...

see now precedent has been set. Paulson can point to this as a reference...I am sure he will argue how close the models are and that his plan is going to be an assured slam dunk! I am changing my vote!

robin said...

This is just a copy cat crime.

Ben Bittrolff said...

The safest thing to do right now, is to get really drunk...

Rebecca Wilder said...

Copycats.

Random, but another funny thing. Did you hear how Hong Kong decided to fight inflation by offering a 3-month rent holiday for residents in public housing?

http://www.ft.com/cms/s/0/57054ef2-5353-11dd-8dd2-000077b07658,dwp_uuid=f6e7043e-6d68-11da-a4df-0000779e2340.html

I seem to remember another one of your posts about a price floor in the stock market? Who comes up with these things? Oh yeah, Paulson.

Great post!

Cobra said...

Yeah, get really really drunk!

Anonymous said...

Ben, Kazakh capitalism is even more screwed up than you know:

From articles on indexuniverse.com's August issue:

The Kazakh language lacks works for "profit" and "interest," so business must be conducted in Russian.

The Kazakh market is not included in frontier market indices because it doesn't have "normal" settlement conventions, like T+3. Intead, it's "rolling settlement," where each trade on the exchange must be followed with another. I don't understand how you can take cash out, then, but that's what IndexUniverse.com says.

borat said...

very nice ,. is good

Mark Allen said...

Did they throw the Jews down the well?

fajensen said...

The Norwegian Oil Fund is determined to double down on it's losing USD "investments"; apparently they are going all-in on USD:

http://www.mffais.com/institutions/124195/

This is why "we Europeans" want "the plan" to fail: It is our money being thrown away too!!

perplexo said...

Kaz's Stock Exchanges are like many of the ex-soviet state Exchanges: very small with few listings and very thin trading. Any corp. bond market at all? Maybe only a handful of issues for trading? Some of these states have no deficit, so do not issue bonds (Treasuries) and thus their central banks have little or no way to influence interest rates...so the borrowers and lenders set their own, deal by deal.
The capital markets in these countries are like Canada's (but on a smaller scale), just too small to function as a place to raise significant capital, that's why we all need London NYC and Tokyo to be running well...global finance requires the big capital markets these places provide.
OTOH smaller Markets can be "regulated" without affecting the entire planet. Unlike say NY or London....but these places would not be what they are without the pre-existing strong stable and predictable legal systems in place to deal with the inevitable disputes and squabbles of any Capital Market.
Bottom line: Kaz (and most like it) are small potatoes, and will follow the lead of the main players. What they do will only have a limited extent of "damage", but sometimes (remember Sweden and its super-high surprise overnight hikes to its central banks' interest rates?) the unilateral action can work due to the small size of the Market being intervened in.

replica rolex said...

$75 Replica Rolex Watches sale, Our site provides Rolex replica, replica Rolex Watches, replica breitling, replica Cartier, replica Omega, Tag Heuer Watches. . .more than 100 famous rolex brands"
rolex air king
rolex datejust
rolex day date
rolex daytona
rolex gmt
rolex submariner
rolex yachtmaster
a lange sohne watches
alain silberstein watches
bell ross watches
breguet watches
breitling watches
bvlgari watches
cartier watches
omega watches
patek philippe watches
ロレックスレプリカ
ロレックスコピー

bathmate said...

nice posting for this site...
Bathmate

Sneakers hobbies said...

nice post!!
We do kinds of casual clothing wholesale online, welcome to visit!!
winter clothing
winter jackets
winter clothes
ski jackets
north face sale
discount north face jackets
north face coats
men's down jackets
cotton polo shirts
polo shirts
cheap polo shirts
ralph lauren polo shirts
discount polo shirts
polo shirts wholesale
columbia jackets
the north face jackets
columbia sportswear jackets

mlb jerseys said...

i dont know if there suitalbe to write something good website i meet here, for i hope every body could have a good shopping experience online.

here i want to introduce this website, mainly selling nfl jerseys,
ghd, christian louboutin, and air max 95.

they offer 24 hours online service, and very very good customer service.
i buy the air max 90 shoes online on the website, nice design and good quality. that is why i strongly introduce you here.

it is not a advertisment, just share my shopping experience with everybody. hope you have a nice day, and could enjoy the good shopping.

ryan said...

Examine the soles of your shoes. Note where UGG Mini wear has occurred. Most people seem to be amazed that their shoes wear at the rear outer corner. Most UGG Mini boots rearfoot strikers will wear at this part of the shoe. The reason for this, which someday, somewhere a funded study will prove, is that for most heel strikers it is the point Mini ugg boots of first contact of the shoe with the ground. Most people walk and run with their feet slightly rotated from center. Runners, however, also have what is called a narrow base Mini uggs of gait. A narrow base of gait means that the feet contact close to the midline of your body. This creates additional varus (tilting in) of the limb. This results, for the rearfoot striker, in the first point hitting the ground being the outer corner of your shoe. Forefoot wear ugg 5854 may point to an individual who is a sprinter, runs fast, contacts the ground with the forefoot first or all of the above. Uneven forefoot wear may show where one metatarsal is plantarflexed relative to the others or where one metatarsal may be longer than the others. In the presence of significant forefoot wear, you are at risk of stress fractures.

Anonymous said...

Get someone trustworthy cheap panadora to travel to your pandora jewery home often to pandora jewerelly maneuver the curtains, water your pandora jewlerry plants and pandora charms and beads do no matter pandora charms yard work needs pandora charms uk to be done. It's unlikely that your trustworthy friend can have pandora charms sale a home-wrecking party as forever happens in the movies. Offer a contact range to a neighbour or friend. This pandora charms 2010 is often for emergencies only.

jiang said...

A good compropmse mght be pandora online something your chikldren want, wich cheap pandora will also be usefdul for them & you. Last year, scooter for one of the pandora charm boys was a big hit as he cuild whistle down the street at him, then fold it & put it in the bag when pandora charms australia he juumped on the bus or want to go inside the shopping center ... Not bad for investment in accordance with $ 100.00. It saved me from going to take him with his bicycle many timse troughout the year. This Christmas does not maztter

apple loans said...

hi, naturalthing1 Back in those days very few people actually knew about Borat or Ali G. Here in South Africa most people only heard about Borat when the Borat movie came out.thanks to all............
John