Dramatic decrease in Kazakh currency’s value may hit Turkish companies

ALMATY/ISTANBUL - Reuters

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Dramatic losses in Kazakhstan’s currency, the tenge, after the country’s transition to a free floating rate may negatively affect a number of Turkish companies that are very active in the country, according to analysts. 

Kazakhstan, which has lost competitiveness to trading rivals during a wave of devaluations and depreciations in the region, abandoned a trading corridor for the tenge and introduced a freely floating rate that weakened the currency by 26 percent against the dollar on Aug. 20. 

The deep losses in tenge may hit the operations of Anadolu Efes, Alarko Holding, Coca Cola İçecek and Turkcell, said analysts. 

According to a note by İş Investment, the Kazakhstan operations constituted some 11 percent of Turkish brewery company Anadolu Efes’ total sales and 9 percent of Coca Cola İçecek’s total sales.

The note said Turkcell, which is active in Kazakhstan with the brand K-cell, may be affected by the devaluation in tenge in a limited manner as Turkcell makes business in the country on net profit sharing. 

Some 31 percent of the existing business operations of Alsim Alarko, a subsidiary of Alarko Holding, totaling around $611 million are being run in Kazakhstan.

“The majority of these projects’ costs are upon the Kazakh tenge and the contracts are possibly open to revision against devaluation. This will decrease pressure over profit margin,” added the note. 

“This is not a devaluation, this is a transition to a freely floating rate when the market itself determines a balanced exchange rate on the basis of demand and offer,” Central Bank Gov. Kairat Kelimbetov told a news conference broadcast from Astana on Aug. 20. 

Kelimbetov noted he expected the market would set “a fully balanced rate” in five or seven days.

He also said the Central Bank would no longer intervene massively to influence the rate but added: “The National Bank reserves the right to intervene when there is a threat to financial and price stability.”