Monochrome by Centil Law: Silver linings

Silver linings

The week ends with two people in Kazakhstan testing positive for coronavirus, the first official instance for the Stans. The Central Asian states are closing off borders for travellers from certain countries.

Kazakhstan halted plans to reduce oil production in compliance with OPEC+ agreements, as Russia refused to further reduce output, leading to a price war with Saudi Arabia. This led to the plummeting of the tenge, and Prime Minister Mamin took the lead of the new state body for operational response, in charge of delivering an anti-crisis plan. 

To protect the national currency, Kazakhstan raised its base interest rate by 2.75%, setting it at 12%, and started selling foreign currency, while forbidding state-run companies to buy any. The National Bank might take further action to ensure economic stability in the face of Brent crude price volatility and the global economic downturn.

The Kyrgyz government followed suit as it intends to protect the Som by getting the National Bank to sell $53.7m on the forex market. The national currency followed the domino effect of the falling Russia’s rouble and Kazakhstan’s tenge, in response to the plummeting oil prices.

Turkmenistan, affected by the suspension of supplies to PetroChina, the country’s largest gas importer, tightened its foreign exchange controls. The country’s Central Bank introduced a threshold for foreign currency purchases at $300 per month. To date, the limit for international money transfers is set at $200 per month.

Coca-Cola’s Uzbek JV company that is majority owned by the state, intends to invest $31m to modernise the production plants in Khorezm and Tashkent to increase output. The company expects the soft drinks market to expand by almost two times, proportionately to the growth of the population in the next decade. 

With a view of improving interconnectivity, the Kyrgyzstan-Tajikistan-Afghanistan-Iran (KTAI) corridor opened for transports, following the success of the Transports Internationaux Routiers pilot route from Iran to Tajikistan through Afghanistan. KTAI offers a shortcut for logistics between Iran and Kyrgyzstan, reducing the existing transit time by 5 days.

China’s ICBC Standard Bank PLC issued a credit line of $100m to UzSQB on flexible terms with the aim to increase and accelerate the possibility to finance small and medium-sized businesses in national currency, in line with the state’s program to extend support to SMEs. 

Kazakhstan's Halyk Bank, the country’s largest asset lender, foresees an expansion for its Tenge Bank in Uzbekistan to support small and medium-sized businesses by increasing its retail portfolio. Coincidentally, Halyk Bank announced a loss of 7.9% for Q4 2019.

Japan-born JCB International plans to enter into a license agreement with PJSC Kyrgyzkommertsbank allowing all JCB card holders worldwide to make purchases across the Kyrgyz Republic, and encouraging trading companies to seek new sales. This partnership also falls in line with the Kyrgyz state’s plans to incentivise cashless payments.

On a happier note, despite last week’s US’s military airstrike on Taliban targets, there might just be hope for peace as the Afghan government prepares to release 1,500 Taliban prisoners, while the US is gradually withdrawing its gradually troops. According to the state decree, if the upcoming intra-Afghan talks prove successful, another 500 prisoners would be released.

In this worrying times investors may look at Central Asia due for a more positive dynamic. Monochrome keeps you posted about the developments in these markets, and all you need to do is subscribe by following this link.

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