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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