OREANDA-NEWS. Last Friday, President Nursultan Nazarbayev said he had instructed the government and Kazyna, a state-owned fund responsible for economic diversification, to consider the possibility of buying out “shares of our companies traded on international markets,” Alfa Bank information department reports. Earlier, government officials had
blamed foreign hedge funds for instigating a massive sell-off of Kazakh securities for speculative purposes.

Prime Minister Karim Masimov further commented that “we will address this issue next week” but did not specify either which companies might be targeted or how much the government was prepared to allocate for the buyout. Although there is a doubt that buying out shares of Kazakh banks in London will prove an effective way of supporting the banking sector, it is believed by the experts that  this news could serve as a short-term catalyst for all Kazakh equities, particularly those of Kazakh banks. According to Alfa Bank's estimate, the total free float of Kazakh banks traded in London is currently close to $2.4 bln. So, a couple of hundreds of millions of dollars, and perhaps less, invested by the government may suffice to boost prices.

However, in the words of analysts, the downside risk is that the government may decide to allocate most of the funds - if and when it does allocate them - locally to support banks on a case-by-case basis by providing liquidity to bail out certain construction projects, mortgage loans or any other projects that might appear socially responsible. This will be the main objective of the $4 bln state fund for supporting local banks that President Nazarbayev instructed the government to create using money from the 2008 budget.