How will Kazakhstan’s Internal Political Machinations Effect the Opening Trading of KazMunaiGaz on October 4?

Public shares of KazMunaiGaz (KMG), Kazakhstan’s state oil company, are scheduled to go on sale at the London Stock Exchange on Wednesday October 4. According to reports, the company was valued at $6.2 billion, and initial shares in London are scheduled to sell at $14.65. Approximately 40% of KMG’s net-worth, or about $2.3 billion, will be floated in a dual listing between the London Stock Exchange and the Kazakhstan KASE market. According to London’s The Times newspaper, about half of the shares are being bought by Kazakh investors, indicating the extent to which Kazakhstan’s elite has gotten the “IPO bug.” The Times also reported that several other Kazkah-based companies are considering making public offerings on the London Stock Exchange in the near future, including the Eurasian Natural Resources Corporation of Alexander Mashkevich, Patokh Chodiev, and Alikhan Ibragimov and the financial empire of KazkommertzBank.

The KazMunaiGaz IPO, however, differs from these others in that KazMunaiGaz is essentially now a state asset. In this context, the opposition political party “Real Ak Zhol” has made a public statement accusing the KazMunaiGaz’s IPO of essentially stripping the majority of Kazakhstan citizens of their deserved revenues from the country’s natural resources. This statement is a follow-up to the original Ak Zhol party’s proposed policy of public revenue-sharing for the state oil and gas company that was a central plank in the party’s platform during the 2004 parliamentary elections. Given the complexities of the IPO process and the limited access to opposition press in Kazakhstan, the statement is unlikely to delay the IPO. It is indicative, however, of the political tension in the country over issues related to natural resources. The question is will this tension effect the performance of the KazMunaiGaz shares in London over the long term? While Kazakhstan investors will certainly continue to be interested in the stock, it is large international institutional investors that will probably be the key to the stock’s success.