Emerging market countries have long been told their cardinal sin and vulnerability in the debt capital markets is currency mismatch — raising funds in dollars or euros while taxing and raising revenues in their domestic currency.
As such, any move to increase countries’ access to funding in local currency should be welcomed. It also seems a good time to issue. International bonds denominated in Russian rouble, Georgian lari and Turkish lira all flew off the shelves last year.
When Russia’s domestic market became Euroclearable in 2013, $9bn flowed into it the year before just in anticipation.
But the same fears voiced in 2013 about Russia will resurface for Kazakhstan now, with vehemence. Is Kazakh rule of law strong enough? Is liquidity good enough? Will covenants be lighter than for Eurobonds?
Investor memories can be short — as testament to which, several Kazakh entities have tapped international markets in recent years — but previous buyers of Kazakhstan are long and angry.
The BTAS restructuring of six years ago saw some international investors lose their shirts twice over thanks to severe haircuts. One of those this week said that bonds in Kazakh tenge may be a new hot thing, but they would not risk another burn.
When Russia opened its domestic markets, it had, by contrast, spent the previous decade being good to international investors, an attitude that's continued through recent US and EU sanctions.
Kazakhstan would do well to remember that any future rush of money into its domestic market will be as much about investors’ feelings about their possible exit as about their entry.