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Central Asia: sustaining growth

Date 25/06/2002

Rosalind Marshall
Assistant Secretary General, Federation of EuroAsian Stock Exchanges

The Central Asian stock exchanges in Kazakhstan, Kyrgyzstan, Mongolia, Turkmenistan (trading only commodities) and Uzbekistan are members of the Federation of EuroAsian Stock Exchanges (FEAS): an organisation with 23 emerging market member stock exchanges in 21 countries throughout Eastern Europe, Central Asia and the Middle East.

Growth in the Central Asian region can be categorised as gradual but sustained, as market economies emerge and stock exchanges develop as a viable financing option. Obstacles in this part of the world are no different from other emerging markets at their inception; they include post-privatisation liquidity, establishing a regulatory infrastructure that allows development while attracting investors, post-privatisation attraction of quality listings, funding for expansion of stock exchange activities, introduction and restructuring of investment products to keep pace with local economic demands, and creating a viable domestic investing market.

As can be seen in the table below, market development through restructure has sustained the viability of the exchanges in the region, while many streamlined their overall operations to take care of post-privatisation trading. Trading in illiquid stocks was condensed to provide for fewer, but higher quality, companies, which ultimately will lead to stability and confidence in the markets.

Central Asian regional statistical comparison


Category 1997 1998 1999 2000 2001
No. companies traded 729 946 1,698 1,041 1,119
Market capitalisation (USDm) 104.7 2,056.8 2,563.0 1,415.0 1,300.5
Total volume-stock (USDm) 44.8 76.1 60.5 169.0 357.0
Total volume-stock (No. shares: m) 19.7 47.1 51.9 249.4 286.2
Avg. daily vol.-stock (USDm) 0.35 0.34 0.26 0.69 1.42
Avg. daily vol.-stock (No. shares: m) 0.22 0.19 0.21 0.99 1.14
Total volume-bond (USDm) Historical bond data not available 7,472.6
Avg. daily vol.-bond (USDm)         29.89


To sustain this growth into the future the main hurdles, as noted above, are being addressed in various ways throughout the region. The projects and their application to the various issues are described below, from the contribution of regional development through FEAS to the future outlook of each individual exchange.

SME development

A feature of the transition to a market economy is the development of small to medium enterprises into candidates for market financing and hence market growth. To sustain market growth the development of this sector is key. In conjunction with the OECD, the Federation has designed and implemented a programme entitled 'Private Sector Development': a comprehensive three year programme dealing with the enhancement of SMEs to promote enterprise development and best practices for entrepreneurship promotion, while creating a stable and favourable climate for business activities within both the whole FEAS region and Central Asia in particular.

Stock exchanges as viable financing alternatives

It is one thing to 'kick off' capital market growth with high volume transition privatisation demand, and another to sustain growth through utilising stock markets as a viable financing source for both private enterprises and the divestiture of profitable long term government-owned enterprises. In the majority of Central Asian markets the process of convincing and wooing prospective public and private companies is in the incubation stage. As part of the development process, the OECD/FEAS Private Sector Development project deals with strategies to promote the role of stock exchanges in financing. On October 22, 2001 a conference of FEAS members was held to determine a strategy for private equity financing in developing markets within the FEAS region. Activity in this area is ongoing, with the aim of improving the market education of both potential government and private issuers.

Funding stock exchange operations

In the early '90s funding of Central Asian stock market operations was achieved through international development grants and local government appropriations. As these stock markets become more independent, and as international and government focuses shift to other arenas, the individual stock exchanges have begun to analyse their current predicament with respect to funding their operations. With respect to expansion, particularly in the technological area, many exchanges are having difficulty in juggling priorities between growth and day-to-day operations. To raise needed capital the Kyrgyz Stock Exchange obtained funds through demutualisation by converting to a for profit organisation and offering shares in its exchange. In addition, the KSE offered shares to the Kazakhstan Stock Exchange to obtain an automated trading system. A creative solution, and one necessary in the face of the 'emerging' status of stock exchanges in this area that cannot find funds for expansion, beyond those necessary to maintain the current status quo. The option of demutualisation, particularly as an operational funding source, will be considered as actively in the Central Asian region as in the more developed markets in terms of the cost-benefits of such a move.

Liquidity/cross-border trading

In the face of potential domestic illiquidity, all Central Asian stock exchanges opened their doors to cross-border trading within the CIS, almost from day one. In this respect they were able to surmount the hurdles posed by more developed markets in that their doors were opened to harmonised rules and regulations to allow trading across borders simultaneously within domestic regulations. As the Kyrgyz and Baku SEs offered participation in their exchanges as shareholders, the Federation is working towards a common trading platform within the region. Key work being done on a UN-sponsored programme in the form of the Southeastern European Economic Initiative (SECI) will pave the way for the organisational efforts to create a common trading platform for the FEAS region. Currently, an FEAS data centre combines all statistical data across members and the FEAS Rule Book outlines the common rules and regulations to accomplish this task.

Individual stock market growth and outlook:

The following sections present the individual statistical history and the future outlook in terms of the priorities of each individual market.

Kazakhstan Stock Exchange (KASE)

KASE statistical comparison 1997-2001

Category 1997 1998 1999 2000 2001
No. companies traded 13 36 66 55 60
Market capitalisation (USDm) -- 1,839.3 2,264.4 1,342.3 1,230.5
Total volume-stock (USDm) 2.3 26.2 21.0 120.2 319.6
Total volume-stock (No. shares: m) 0.1 3.7 14.2 33.3 177.0
Avg. daily vol.-stock (USDm) 0.09 0.11 0.08 0.48 1.3
Avg. daily vol.-stock (No. shares: m) 0.003 0.02 0.1 0.13 0.7
Total volume-bond (USDm) Historical bond data not available 7,442.3
Avg. daily vol.-bond (USDm)         29.8
Monthly averaged turnover ratio -- 0.001 0.001 0.007 0.02
Index -- -- -- 106.4 103.9
Currency/USD 75.6 83.8 138.2 145.0 150.2

Future outlook:

  • Development of internet-trading;
  • Development of collective forms of investment;
  • Attraction of insurance companies as institutional investors;
  • Restructuring of document circulation, in particular to facilitate the use of electronic signature; and
  • Expansion of the powers of the brokerage houses.

Kyrgyzstan Stock Exchange (KSE)

KASE statistical comparison 1997-2001

Category 1997 1998 1999 2000 2001
No. companies traded 40 51 63 80 54
Market capitalisation (USDm) 8.8 9.1 3.9 3.8 4.7
Total volume-stock (USDm) 0.8 2.3 7.5 22.8 17.9
Total volume-stock (No. shares: m) 3.2 4.7 9.5 172.0 83.8
Avg. daily vol.-stock (USDm) 0.00 0.01 0.03 0.09 0.07
Avg. daily vol.-stock (No. shares: m) 0.013 0.018 0.0 0.7 0.3
Total volume-bond (USDm) Historical bond data not available 1.1
Avg. daily vol.-bond (USDm)         0.004
Monthly averaged turnover ratio -- -- 0.2 0.4 0.4
Index 197.0 122.0 81.5 53.0 64.0
Currency/USD 17.4 29.4 45.4 48.0 48.0

Future outlook:

  • Improving trading conditions on the KSE trading floor;
  • Introducing new financial instruments;
  • Organising trades with future and forward contracts, bonds and certificates;
  • Enhancing the automated trading system for trading in corporate stocks and bonds, as well as state treasury bills and futures;
  • Participating in the state privatisation programme, including the selling of state shares, through the KSE; and
  • Negotiating with government agencies to float both primary and secondary issues of treasury bills over the KSE.

Mongolian Stock Exchange (MSE)

MSE statistical comparison 1997-2001

Category 1997 1998 1999 2000 2001
No. companies traded 478 429 419 410 400
Market capitalisation (USDm) 54.1 39.8 32.1 36.9 37.5
Total volume-stock (USDm) 5.6 12.9 3.2 2.8 1.6
Total volume-stock (No. shares: m) 11.0 33.1 21.5 35.4 15.9
Avg. daily vol.-stock (USDm) 0.09 0.05 0.01 0.01 0.01
Avg. daily vol.-stock (No. shares: m) 0.174 0.131 0.085 0.139 0.062
Total volume-bond (USDm) Historical bond data not available 29.1
Avg. daily vol.-bond (USDm)         0.11
Monthly averaged turnover ratio -- 0.021 0.008 0.008 0.003
Index 360.1 235.0 255.7 469.9 814.0
Currency/USD 813.2 902.0 1,072.4 1,097.0 1,102.0

Future outlook:

  • Reforming the formulation and enforcement of MSE rules;
  • Setting up a new electronic network system;
  • Improving and tightening information disclosure in the securities market;
  • Developing a corporate bond market.

'Toshkent' Republican Stock Exchange (TRSE)

TRSE statistical comparison 1997-2001

Category 1997 1998 1999 2000 2001
No. companies traded 198 430 1,150 496 605
Market capitalisation (USDm) 41.7 168.5 262.6 31.9 27.9
Total volume-stock (USDm) 36.0 34.7 28.8 23.2 17.9
Total volume-stock (No. shares: m) 5.4 5.6 6.7 8.7 9.6
Avg. daily vol.-stock (USDm) 0.18 0.17 0.14 0.11 0.07
Avg. daily vol.-stock (No. shares: m) 0.026 0.027 0.03 0.04 0.04
Total volume-bond (USDm) Historical bond data not available --
Avg. daily vol.-bond (USDm)         --
Monthly averaged turnover ratio 0.2 0.066 0.029 0.067 0.079
Index -- -- -- 79.8 82.2
Currency/USD 80.2 110.0 140.0 325.0 688.0

Future outlook:

  • modernisation of clearing and settlement technologies;
  • cross border/common platform trading of Uzbek issuers;
  • attraction of viable joint-stock companies to the official listing;
  • development of the secondary market to be achieved by restricting unorganised off-stock market transactions.

The Federation of EuroAsian Stock Exchanges provides statistics for members on a monthly basis. For more information please go to or contact

Rosalind Marshall has been the Assistant Secretary General of the Federation since its inception in 1995. Ms Marshall has 25 years of Pacific Rim Banking experience and has worked through EBRD and USAID sponsored programmes for the Central Bank of Kyrgyzstan and Central Asia.