Azernews.Az

By Bloomberg

A Swiss private bank has sold the first structured note denominated in Kazakhstan tenge in more than three years even as the likelihood of the central Asian nation devaluing its currency mounts.

After scrapping an attempt to get a similar offering away in December, Zurich-based EFG International AG sold 5.08 billion tenge ($27.3 million) of three-month, callable notes on March 18, the first structured offering in the currency since September 2011, according to data compiled by Bloomberg. Leonteq AG, also based in the city, arranged the sale.

Kazakhstan has been under pressure to devalue the tenge after a 46 percent plunge in the ruble last year boosted the competitiveness of Russian exporters. Russia is Kazakhstan’s biggest export market. Other former Soviet republics including Belarus, Azerbaijan, Turkmenistan and Moldova have devalued their currencies to adjust against the ruble’s decline.

Christophe Spanier, a managing director for structured products sales at Leonteq, declined to comment on the offering.

The notes, sold by EFG International unit EFG International Finance Guernsey Ltd., were issued at 89.787 percent of par and have a final redemption value that’s tied to the exchange rate between the tenge and the U.S. dollar, Bloomberg-compiled data show.

Snap Election

The tenge has weakened 2 percent against the greenback this year. The Ukrainian hryvnia, the Azerbaijani manat and the Belarusian ruble are the three worst-performing currencies globally, declining more than 24 percent in the period.

Expectations Kazakhstan will devalue the tenge are rising following the calling of a snap presidential election last month. The poll, scheduled for April 26, was to have been held next year.

“I’m not bullish on Kazakhstan these days,” Lutz Roehmeyer, a money manager at Landesbank Berlin Investment GmbH, said March 23. “The economy is suffering from weak energy prices and from not devaluing the tenge.”

Roehmeyer, who oversees Landesbank Berlin’s $1.1 billion emerging markets debt portfolio, doesn’t hold Kazakh bonds anymore. “Going to vote earlier is a sign devaluing the tenge is urgently needed,” he said.

EFG International and Leonteq were previously marketing an 18.2 billion tenge structured note sale in December, according to data compiled by Bloomberg. The offering was ultimately shelved, according to people familiar with the matter who asked not to be identified because the details are private.

Although buying tenge-denominated notes now may not be optimal, there could be opportunities for investors post any devaluation because Kazakhstan has sound credit fundamentals and is one of the safest oil-related names, said Imre Tajti, an investment manager at Aberdeen Asset Management Plc who manages over $12 billion in emerging market debt and has exposure to sovereign and quasi-sovereign Kazakhstan names.

“If we see a 15 to 20 percent devaluation in May, we shouldn’t expect to see another one within a year,” Tajti said. “From a currency point of view, for one year, you’re safe.”