The Kazakh Market: CPC as a Risk Factor, the Summer Slowdown, and Weakening Support for the Tenge

Brent crude, which had surged past the $100-per-barrel mark late last week, fell to $84 over the course of the week. An attempt to rebound ended at $93, followed by a pullback to $88.

The Novorossiysk terminal of the “Caspian Pipeline Consortium” (CPC), through which approximately 80% of Kazakhstan’s oil is exported, announced on Monday that it had resumed operations after a week-long shutdown. However, on Thursday, the terminal shut down again.

U.S. President Donald Trump’s suggestion that Ukraine not attack ships that do not belong to Russia does not yet seem feasible: at the moment, open sources report only one tanker in Novorossiysk—it is named after the Tatar poet Musa Jalil and flies the Panamanian flag.

Despite concerns about the outlook for budget revenues from oil exports, the tenge has remained relatively stable. At the start of the week, the Kazakhstani currency weakened from 467 to 475–477 per dollar, but by Friday, the exchange rate had gradually strengthened to 473–475 tenge per dollar—though it had only returned to the upper levels seen at the beginning of the month. By contrast, the MSCI Intl Emerging Market Currency Index rose by nearly 1% over the week.

The second key item on the weekly agenda remained the issue of interest rates. While at the beginning of the year most investment banks were talking about the imminent start of an easing cycle—including for Central Asian economies—the prevailing sentiment now is that “it would be strange to cut rates.” Last week, the National Bank of Kazakhstan cut its base rate by only 0.25 percentage points to 16.75%—compared to a full percentage point cut the quarter before. And the signal regarding further cuts in the National Bank’s management comments sounded, at the very least, cautious.

The situation is similar among our neighbors: On the same day, the Central Bank of Russia also cut its rate to 14%—however, while it had been cutting the rate by 0.5 percentage points at every meeting from the start of the year through June, the pace of cuts slowed to 0.25 percentage points at the last two meetings. The National Bank of Uzbekistan kept its rate at 14% this week. Dmitry Dolgin, ING’s chief economist for the CIS, attributes this decision to the intention to support the local currency amid the prolonged freeze on gold exports and the resurgence of inflation—and therefore does not expect further cuts until next year. According to data from Metals & ESG Trends.KZ, based on results for 2025 and the first quarter of 2026, Kazakhstan is also among the world’s top gold buyers—a fact that is bound to impact foreign currency inflows from exports.

“Even global investment banks now recognize the KTK as a risk factor—in particular, Bank of America has withdrawn its ‘buy’ recommendation for government securities denominated in tenge and considers the tenge’s exchange rate to be overvalued. Nevertheless, we are maintaining our baseline year-end forecast of 505–510 tenge per dollar for now, and we see the main reason for the tenge’s weakening not in this risk, but in the expected exit of carry traders, – explains Freedom Finance analyst Ansar Abuev. – Many foreign investors entered our market at the end of the year: the exchange rate was stable, interest rates were high, and there was potential for inflation to decline. But these incentives are fading; we can expect interest rate cuts to resume in November, and we anticipate that support for the tenge will weaken.”

Toward the end of the week, the KASE Index attempted to break out of the sideways trend that began back in late January. The index rose 1.02% by the close of last week, with 0.89% of that gain coming on Friday, bringing the index to 7,802.89 points. Since the start of the year, it has risen by 11.04%, while the MSCI FM (Frontier Markets) Index has gained only 10.79%—even though the tenge has strengthened against the dollar by more than 4.5% during that time.

“Our market is characterized by seasonality and a summer lull; all local stocks—KEGOC, ‘Kazakhtelecom,’ and ‘KazTransOil’—have been stagnant since the beginning of summer,” says Ansar Abuev. He notes that there is now a glimmer of hope in the external environment, and the KASE has reached 7,800 points largely because of this. “The blue-chip stocks—Kaspi, Kazatomprom, and Halyk Bank—sometimes bring external volatility along with this. For example, when the risk of high inflation arises in the U.S., it spills over to us—albeit to a lesser extent. But while Japan’s Nikkei index sometimes drops by 4% in a day, and South Korea’s KOSPI can move as much as 10% in a day, a daily move of more than 1% is rare here.” Abuev notes that earnings season will begin next week, but the market reaction won’t be immediate, so “a full-fledged breakout from the sideways trend is more likely to occur in the second half of August.”

This article was AI-translated and verified by a human editor