Kazakhstan to Hedge Funds: “Mugabe, Set, Match, dudes”

by Johnny Debacle

Mugabe is only growing stronger in the world, his discorporated Zimbabwenomic-self is popping up on the very edge of dynamic economic policies. Kazakhstan has announced it will buy publicly listed Kazakh bank stocks until prices return to their normal price (in this case, “normal” should be read as “all time peak”):

Kazakhstan will respond to an “attack” by hedge funds by buying shares next week in the country’s banks that are listed on foreign exchanges to support prices, its prime minister said,

“Kazakhstan is under attack from hedge funds and we will fight back,” Karim Masimov said, after president Nursultan Nazarbayev complained the country was suffering from “unfounded” downgrades of its credit ratings.

The government said it would buy stock of banks until prices reach “pre-August levels” and will do the same for non-banking stocks “if warranted”. The state was also prepared to lend $4bn (£2bn) to banks to ensure liquidity, he said.

Kazakh banks have been hit by the ripples from the US sub-prime crisis. Kazkommertsbannk, Alliance and Halyk Savings Bank are all listed in London. Many banks in the country have also been hurt by an outflow of deposits and waning confidence in the national currency, the tenge. In August, banks suffered “massive withdrawals”.

Recommendation: The Borat mania caused us to be short everything Kazakh, but since then K-Stan has been flying totally under the radar. The implications of a Mugabe-style explicit government put on Kazakh stocks, leads to our valuation models predicting a price for any Kazakh bank stock of X+1, where X is the current market price. We rate Kazakh bank stocks as a “Strong Buy Indeed” because prices, per our valuation model, can only go higher.

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  1. junior finance scammer
    October 16th, 2007 | 8:54 am

    Nazarbayevintervention as a potential subfield of mugabenomics?

    excellent blog, btw

  2. OL
    October 16th, 2007 | 8:55 am

    this is weird because in kasakhstan, credit ratings downgrade you.

  3. OL
    October 16th, 2007 | 8:56 am

    also happens in kazakhstan

  4. Toro
    October 16th, 2007 | 10:08 am

    That’s awesome!

  5. JT
    October 16th, 2007 | 11:28 am


    Wouldn’t it be more like x+k^m, where k is the kazac fudge factor, and m is the mugabe-optimal multiplier thingy…

  6. Leveraged Burnout
    October 16th, 2007 | 11:40 am

    We laugh, but isn’t this just a few more degrees removed from (a) the US Fed printing money and (b) major US banks all colluding to backstop one another’s conduits in order to support the prices of highly questionable structured credit products?

  7. bfellows
    October 16th, 2007 | 2:38 pm

    yes, but we NEVER come out and say it. bye bye year end bonus for you.

  8. Hugo Chavez
    October 16th, 2007 | 4:43 pm

    i like this idea. can i do this with a reputation? I would like to buy my reputation until it returns to previous peaks.

  9. economic ninja
    October 17th, 2007 | 8:01 am

    I dont see whats wrong with this idea. Why buy a stock if its not going up? GM would sell more cars if they did this, Dell more pcs, you get the idea.

  10. Bond investor
    October 18th, 2007 | 1:21 am

    Johnny, not to get too serious about this, but a quick search on ADR.com brings up no Kazakh ADRs that us little guys can buy in, say, a Scottrade account. At least I can’t figure out how to buy on the London exchange….

  11. cmsd2
    October 18th, 2007 | 12:12 pm

    How does this work anyway?

    Kazakh Sovereign Bank issues more debt, to get cash to buy stocks.
    National debt interest cover goes down reinforcing the negative outlook the agencies have taken. Hrm.

    Perhaps those crazy Kazakhstanians are going to IPO their own country to raise cash?

  12. chris
    October 18th, 2007 | 12:47 pm

    Apparently Jeff Matthews of “Jeff Matthews is not making this up” doesn’t visit your site. He talks about how the Kazak stock exchange might prohibit shorting stock – not knowing that in kazakhstan, shorting stock is economic suicide.

  13. bfellows
    October 18th, 2007 | 4:08 pm

    Any chance Jeff Matthews is related to Chris Matthews? If so, that could be a nice hedge for the Zell-Matthews duel trade. Short Chris, Long Zell, Long Jeff. Creates a synthetic bond with returns of X+1. At least that’s what the CFA Level 2.25 curriculum says.

  14. chris
    October 19th, 2007 | 10:47 am

    cmsd2 – I’m sorry you don’t understand how this works. You suffer from the typical inflexible western linear inside-the-box thinking. Your future giant squid masters will eat you alive (literally).