Tashkent, Uzbekistan (UzDaily.com) — Central Asia hosts seven stock exchanges, with Kazakhstan and Kyrgyzstan each having two. This overview provides an analysis of the activities of Central Asian stock exchanges over recent years. It is important to note that the stock exchanges in Turkmenistan and Tajikistan are less active compared to those in other countries.

Established 8-9 years ago, these exchanges have fewer than five issuers, and one of them has seen no transactions for several years. Therefore, this review focuses primarily on the exchanges in Kazakhstan, Uzbekistan, and Kyrgyzstan, where market activity among issuers, investors, and traders is most dynamic.

Kazakhstan

Kazakhstan stands out as the only country in the region with two truly independent stock exchanges under different management: KASE and AIX. KASE was established in the former capital early in the country’s independence, while AIX was created in 2017 in the current capital. As of the end of June 2024, KASE listed 252 non-government issuers and 698 securities. The exchange has 52 professional market participants and 704,000 individual accounts as of 1 April 2024, with a growth of 11,000 new accounts in the first quarter.

Trading volume in the first half of 2024 continued to grow, increasing by 19% from 157.8 trillion tenge (US$349 billion) to 187.2 trillion tenge (US$417 billion). However, it is important to note that a significant portion of this trading volume is concentrated in the money market, reaching 164.8 trillion tenge in the first half of 2024.

The money market, mainly driven by REPO operations, accounted for 67% of the total trading volume on KASE. REPO involves the sale of securities with an obligation to repurchase them. The money market also emerged as the main driver of KASE’s growth, with a 19% increase compared to the previous year. Additionally, trading volumes rose in the foreign exchange market (+28% YoY, 15.7 trillion tenge), corporate debt market (+52% YoY, 4.7 trillion tenge), and mutual funds (+17% YoY, 189 billion tenge). Trading volumes in the KASE Global sector increased by 36%, reaching 12.4 billion tenge. Conversely, trading volumes in government securities fell by 6%, and derivatives saw a significant drop from 23.5 billion to 31.4 thousand. Despite this, the market capitalization of stocks has grown by 20.8% since the beginning of the year, reaching 32.3 trillion tenge (US$68.3 billion).

For AIX, the first half of 2024 was also successful, bringing substantial growth in key metrics that reached new records. The exchange has fewer issuers and securities than KASE: 111 issuers and 184 securities. On the other hand, the number of trading members exceeds KASE’s professional participants, reaching 57, of which 27 are foreign. Total trading volume in the first half of 2024 amounted to US$707 million, five times higher than the previous year’s figure. Specifically, stock trading volume reached US$130 million in 2023, nearly doubling. Of this, 31% was from transactions conducted by non-residents. Stock market capitalization on AIX grew impressively by 63%, reaching US$62.6 billion by the end of 2023. Data for the first half of 2024 for stocks is not yet available. AIX also has its own securities depository, which had over 1.75 million accounts by the end of June 2024, an increase of 250,000 from the end of 2023. In the first half of 2024, 44 securities listings were achieved, compared to 63 for the entire year of 2023.

Kyrgyzstan

The Kyrgyz Stock Exchange (KSE) was founded in 1994, with trading commencing in 1995. The exchange hosts 36 issuers and 41 securities, including stocks and bonds. In 2023, these issuers reached a trading volume of 29.1 billion soms (US$331 million at the average exchange rate), a 56% increase from the previous year. A total of 2024 transactions were completed, just 14 more than in 2022, indicating a sharp increase in the average value per transaction. The most active sector on the exchange is stocks, accounting for 92.5% of the total trading volume last year. The market capitalization of listed companies reached 93.5 billion soms (US$1.05 billion) by the end of 2023, a 16% increase from the end of 2022.

Bonds on the KSE are less popular, constituting only 6.5% of the total trading volume in 2023. Government securities (GS) had a more significant share, with 60 transactions totaling 1.3 billion soms (US$14.5 million). For the first half of 2024, GS placements reached 1.2 billion soms (US$13.5 million), nearly matching the previous year’s volume. Corporate bonds totaled only 590 million soms (US$6.7 million) in trading volume in 2023. Additionally, trading occurs in the commodity and precious metals sectors, but each sector’s trading volume barely exceeded 200,000 soms in 2023.

Kyrgyzstan also has a second platform, the “Kyrgyz Stock Exchange – BТС” (KSE-BТС), which merged with KSE in 2011 and conducted only depository activities for 11 years. Trading resumed on KSE-BТС in July 2022. The situation here differs from Kazakhstan, as the exchanges have long been merged and effectively coexist. Nonetheless, there are transactions occurring on both exchanges separately. However, the number of transactions on KSE-BТС is significantly lower than on KSE, although its trading volume saw a sharp increase last year, almost matching KSE’s figures. In 2022, KSE-BТС had 52 transactions with a trading volume of 3.07 billion soms (US$37 million), rising to 317 transactions and a trading volume of 21.3 billion soms (US$242 million) in 2023. A significant portion of this trading volume was in primary markets, with 15 transactions totaling 21 billion soms, largely attributed to the State Development Bank of Kyrgyzstan (14.8 billion soms). These placements were essentially private capital increases, with no change in the state’s 100% ownership. Considering these one-time growth factors, it is unlikely that KSE-BТС is a significant player in Kyrgyzstan’s stock market at present.

Uzbekistan

The Republican Stock Exchange "Tashkent" was founded in April 1994. As of 30 June 2024, the exchange had 103 issuers and 157 securities. Most issuers (99) have stocks, and only 6 have bond issues. The exchange also operates an off-list trading platform (OLTP) where transactions for 117 issuers take place, all involving stocks. Trading volume on the main platform in the first half of 2024 was 444.97 billion soms (US$35.6 million) from 246,000 transactions. The number of transactions increased by 82% compared to the first half of 2023. However, there was a significant year-over-year decline in trading volume by 79%. No IPOs were conducted in the first half of 2024, compared to three IPOs in 2023, totaling 104 billion soms (US$8.9 million) with 12,400 transactions. The market capitalization of listed stocks grew from 165.9 trillion soms (US$13.5 billion) at the beginning of 2023 to 237.9 trillion soms (US$18.95 billion) by the end of June 2024. According to the Central Depository of Securities of Uzbekistan, the number of brokerage clients with non-zero balances as of July 1, 2024, was 813,600, with 749,200 being individuals.

Tajikistan

Tajikistan’s stock market is essentially represented by just two issuers with limited trading activity. The Central Asian Stock Exchange (CASE) was founded in April 2015, with British GMEX Group as one of its major shareholders. According to the exchange’s website, the only listed company is Bank Eskhata, and there are no stocks on the market. In the corporate bonds market, only one issuance, E-Leasing, is listed, with no transactions reported on the secondary market, and its maturity ended a couple of years ago. The market has only two professional participants: a central depository and a brokerage company.

Recent news indicates plans to develop the government securities market in Tajikistan. On January 17, 2024, a ceremony was held to open government securities trading on CASE. Potential buyers, including those from abroad, can conduct transactions through local brokers or commercial banks. As of the time of this review, there is no activity, actual transactions, or trading statistics available for the government securities sector on the exchange’s website.

Turkmenistan

The Turkmenistan stock market is represented by the Ashgabat Stock Exchange, established on August 17, 2016. The exchange lists 8 companies, including 2 from the banking sector, 2 from the textile industry, one confectionery factory, one automotive sector company, and one meat producer. Notably, 4 companies were added to the list this year, having issued bonds. From 2019 to 2024, there were 72 transactions with securities totaling 85.9 million manat, equivalent to US$24.4 million at the official exchange rate. It is interesting to note that in 2024, three transactions took place amounting to 3.6 million manat (US$1 million). Until 2023, trades were conducted only with stocks; however, starting in 2023, 6 transactions were conducted with bonds and only one with stocks. Most transactions since 2019 involved the aforementioned two banks issuing securities. Bonds of a leather goods manufacturer saw four transactions in August and December last year totaling 30 million manat (US$8.57 million). Otherwise, information about the exchange and its activities is limited.

Comparison and Conclusions

The stock markets of Central Asian countries can be categorized into three groups based on size. The first group, with the highest indicators and sector diversity, includes KASE, which also shows substantial growth. The second group consists of AIX, the stock exchanges of Uzbekistan, and Kyrgyzstan, which are in a phase of active growth and have greater potential for expansion. The third group comprises the less active exchanges of Tajikistan and Turkmenistan, where there are extremely few issuers and transactions.

In all major indicators, KASE stands out as the clear leader in the region, with trading volumes vastly surpassing those of other active exchanges in the area.

The US$417 billion trading volume for the first half of 2024 is markedly higher than the trading volumes of AIX, KFB, and RFB "Toshkent," which amount to only several hundred million dollars. However, KASE’s leadership in equity trading is not as pronounced, as a significant portion of the record trading volume is attributed to the money market. In 2023, KASE’s trading volume for stocks was US$731 million, compared to US$130 million for AIX. Despite AIX’s doubling in growth, it was unable to close the gap with KASE in monetary terms, which remained at US$600 million.

It is noteworthy that 2023 marked significant changes in the competition for the second place in trading volumes. While RFB "Toshkent" held this position in 2022, AIX became the second-largest exchange in the region in 2023, surpassing its Uzbek counterparts by more than twice the volume. Additionally, RFB "Toshkent," having experienced nearly a twofold decline in trading volume, lost its third place, making way for Kyrgyzstan’s KFB, which outperformed the Uzbek exchange by US$100 million. In 2024, this trend is likely to continue, as trading volumes on RFB "Toshkent" dropped by nearly 80%. Although there are no recent comprehensive data for KFB, such a drastic decline seems unlikely. Furthermore, AIX continued to grow in the number of issuers, rising from 94 to 111 in the first half of 2024, while RFB "Toshkent" saw a decrease from 115 to 103. Thus, AIX effectively holds the second place, pushing RFB "Toshkent" down, while KASE remains the sole leader with 252 issuers. The same pattern applies to the number of securities issues, with RFB "Toshkent" ceding leadership to AIX in the first half of 2024.

Interestingly, in 2023, KASE lost its leading position in market capitalization for stocks. AIX, with a capitalization of US$62.6 billion, ranked first, surpassing KASE by US$3.7 billion. RFB "Toshkent" was in third place, with its stock market capitalization reaching double-digit billions for the first time, totaling US$13.2 billion. In Kyrgyzstan, the total value of all stocks amounts to only US$1 billion, though this is a 76% increase compared to 2022. As of the end of June 2024, capitalization data is available only for KASE and RFB "Toshkent," with both showing significant growth compared to the end of 2023.

Daniyar Orazbaev, Analyst, Freedom Finance Global