Fitch Ratings-Moscow-29 February 2016: Fitch Ratings says in a new report that the ratings of Kazakh National Holding companies are under long-term pressure from planned sale of key assets and a devalued tenge.
Fitch may re-assess the linkage of Kazakh national holding companies with the sovereign (Kazakhstan (BBB+/A-/Stable) as weaker, leading to wider notching between the ratings. The reassessment could result from the reduced strategic importance of the national holding companies due to large disposal of core assets, high forex exposure, increasing tensions in the budgetary system and consequently weaker potential support.
The recent announcement of large-scale privatisations and the introduction of a floating exchange rate regime represent the Kazakh authorities' response to the new macroeconomic environment. The republic has been experiencing severe economic challenges resulting from the steep drop in oil prices followed by the sharp tenge depreciation that have undermined financial stability and weakened GDP growth.
Fitch considers that the Kazakh national holding companies' role as state agents managing key assets may shrink if the announced extensive privatisation plans materialise. Fitch rates Kazakh national holding companies under its PSEs criteria and views them as credit-linked entities. The ratings of JSC Sovereign Wealth Fund Samruk-Kazyna (BBB+/A-/Stable) and JSC National Management Holding Baiterek (BBB+/A-/Stable) are equalised with the sovereign, while KazAgro National management holding JSC (BBB/BBB+/Stable) is rated one notch lower. Ratings are driven by the entities' unique legal status, important strategic role, strong state control and moderate-to-strong integration with the sovereign.
The report, 'Kazakh National Holdings: Sale of Key Assets and Devalued Tenge Put Long-Term Pressure on Ratings', is available at www.fitchratings.com or by clicking on the link above.
Source: Fitch Ratings