Moody's: Tenge valuation not good for many Kazakh issuers

Moody's Investors Service said the recent devaluation of the Kazakh tenge is likely to be beneficial for Kazakh exporters but will substantially increase the risk profile of most Kazakh financial institutions as well as the debt burden of non-export oriented corporates.

The National Bank of Kazakhstan devalued the country's national currency by 18% on Wednesday in order to preserve its foreign-currency reserves, the agency said.

Devaluation also increases already high refinancing risks of the banking sector and will negatively impact the capital of the banks, Moody's said. Although many Kazakh banks hedge their open foreign exchange positions with currency derivatives, the agency believes that the tenge devaluation has led to a substantial rise in the banks' vulnerability to credit risk as approximately 54% of loans by Kazakh banks rated by Moody's and nearly 65% of the liabilities of these banks are denominated in foreign currencies, mainly in dollars.

Oil and gas businesses are cushioned due to dollar-denominated transactions for oil and gas related trades, and Kazakhstan's oil and gas companies have also maintained a relatively modest level of leverage in recent years due to strong cash flows in prior periods, Moody's said.

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