UDK 631.18.02

Abraliev Onalbek, Erkimbekyli Rauan

Kazakh National agrarian university

THE CURRENT STATE OF THE DEMAND SIDE IN THE INTERNAL MARKET OF THE CASH CURRENCY EXCHANGE IN THE REPUBLIC OF KAZAKHSTAN

Annotation

The article analyses the demand side of the internal currency market in the Republic of Kazakhstan. The internal exchange market in Kazakhstan are dominated by four major currencies: American dollars, euro, Chinese yuan and Russian roubles. The exchange rate of those currencies is determined by the state of Kazakhstan Stock Exchange (KASE).

Keywords: currency market, exchange rate, internal market, demand, American dollars, euro, Chinese yuan, Russian ruble.

The Republic of Kazakhstan has been an active member of the international trade since gaining the independence in 1991 [1]. As a result, the Republic of Kazakhstan had entered the global currency market to satisfy own economic goals [2].

The American dollar (USD) is the most often used currency in the global trade [3]. Its official exchange rate in Kazakhstan is determined by the price of the dollar traded over T+0 scheme (USDKZT_TOD) in Kazakhstan Stock Exchange (KASE) [4]. According to the National Bank of Kazakhstan the average exchange rate of the American dollar (USD) for August 2017 was 332.69 tenge [5]. The figure below shows the equilibrium for the American dollars in cash sold by the population and other economic agents to exchange offices in the Republic of Kazakhstan.

Figure 1 – The equilibrium between average exchange rate of the American dollars in tenge and quantity of the American dollars in thousand units sold by the residents and other economic agents to exchange bureaus in the internal cash exchange market for August 2017.

Note: the minimum of average exchange rate can not be equal to zero as the American dollars are not issued by the National Bank of Kazakhstan. Moreover, Kazakhstan needs to sell a commodity, resources or products in order to get the American dollars.

Sources:

1. The National Bank of Kazakhstan (2017) Official exchange rates, 2017. Available: http://www.nationalbank.kz/cont/2017%20eng8.pdf [Accessed: 10 October 2017].

2. The National Bank of Kazakhstan (2017) Purchases/Sales of Cash Foreign Currency by Exchange Offices (Bureaus) during the August 2017. Available: http://nationalbank.kz/cont/%D0%BF%D0%BE%D0%BA_%D0%BF%D1%80%D0%BE%D0%B4_%D0%B0%D0%BD%D0%B3%D0%BB_20177.xls [Accessed: 10 October 2017].

The figure above shows that around 546692.25 thousand American dollars of cash were bought by exchange offices in August 2017.

The figure below shows how much American dollars in cash were sold by different economic agents to exchange bureaus in August 2017 by provinces of the Republic of Kazakhstan.

Figure 2 – The volume of purchases of American dollars in cash by exchange offices by provinces of the Republic of Kazakhstan for August 2017, thousand units

Source: The National Bank of Kazakhstan (2017) Purchases/Sales of Cash Foreign Currency by Exchange Offices (Bureaus) during the August 2017. Available: http://nationalbank.kz/cont/%D0%BF%D0%BE%D0%BA_%D0%BF%D1%80%D0%BE%D0%B4_%D0%B0%D0%BD%D0%B3%D0%BB_20177.xls [Accessed: 10 October 2017].

The figure above shows that the highest share of the market belongs to the city of Almaty – 50.7% of the market share or 277199.05 thousand units of American dollars (USD). The second place belongs to the capital of Kazakhstan, the city of Astana – 15.45% of the market power or 84461.22 thousand units of USD. The two biggest cities of the Republic of Kazakhstan, Almaty and Astana, despite their small territory compared to the rest of the country have more than half of the market control – 66.15%. The lowest share of the market in the internal cash market belongs to West Kazakhstan province – 0.61% of the market power or 3307.56 thousand units of the American dollars.

The euro is the second largest currency traded in Kazakhstan Stock Exchange (KASE) [6]. The figure below shows how much euro were sold in cash to exchange offices by the population and different economic organisations to exchange bureaus.

Figure 3 - The volume of purchases of euro by exchange offices in cash in provinces of Kazakhstan in August 2017, thousand units.

The figure above shows that that the first quartile of for the volume of purchases by exchange offices is 524.53 thousand units of euro. The value of the third quartile is 2169.545 thousand units of euro. Therefore, the interquartile range equals to 1,645.015 thousand units of euro.

Kazakhstan has tight economic relationships with China [7]. Moreover, the growing power of Chinese economy creates Chinese yuan (CNY) the demand in the global currency market [8]. Therefore, Kazakhstan Stock Exchange (KASE) has introduced Chinese yuan (RMB) for trading since 2014 [9].

The figure below shows how much Chinese yuan (CNY) in cash were bought by exchange bureaus in August 2017 from different economic agents in different provinces of Kazakhstan.

Figure 4 – The cash sales volume of Chinese yuan by the residents and other economic entities to exchange bureaus by provinces of Kazakhstan in August 2017, thousand units.

The figure above shows that the city of Almaty has the highest market share in August 2017 – 18189.94 thousand units of Chinese yuan.

Russian is one of the top strategic and economic partners of Kazakhstan [10]. Russian rubles also traded at Kazakhstan Stock Exchange (KASE) [11]. The figure below shows how much cash in Russian rubles (RUR) were bought by exchange offices from different economic agents.

Figure 5 – The volume of Russian rubles bought from economic agents by exchange bureaus in different provinces of Kazakhstan in August 2017, thousand units.

The figure above shows that Kyzylorda province has the lowest volume of Russian rubles sold to the exchange offices - 72230.76 thousand units.

In conclusion, the internal market of cash sales to exchange offices are dominated by cities of Almaty and Astana in August 2017: USD and EUR – above 50% of the market power, CNY – nearly 93.4% of the market share. However, for Russian rubles cities of Almaty and Astana do not have together the market domination in August 2017 – only 28.57%.

Bibliography

1. Economic and Social Commission for Asia and the Pacific (2001) Accession to the World Trade Organization: Issues and Recommendations for Central Asian and Caucasian Economies in Transition : Proceedings and Papers Presented at the Subregional Workshop on Accession to the World Trade Organization, Economies in Transition, Tashkent, 25-27 July 2001. New York: United Nations

2. Monetary and Capital Markets Department, International Monetary Fund (2008) Annual Report on Exchange Arrangements and Exchange Restrictions 2008. Washington, D.C.: International Monetary Fund.

3. Cohen, B. (2012) The Future of Global Currency: The Euro Versus the Dollar. New York: Routledge.

4. Kazakhstan Stock Exchange (2015) Trades browsing. Available: http://www.kase.kz/en/trades/index [Accessed: 10 October 2017].

5. The National Bank of Kazakhstan (2017) Official exchange rates, 2017. Available: http://www.nationalbank.kz/cont/2017%20eng8.pdf [Accessed: 10 October 2017].

6. Kazakhstan Stock Exchange (2017) Results of trades in foreign currencies. Available: http://www.kase.kz/en/cur/index [Accessed: 10 October 2017].

7. Song, W. (2016) China's Approach to Central Asia: The Shanghai Co-operation Organisation. London: Routledge.

8. Prasad, E. (2017) Gaining Currency: The Rise of the Renminbi. Oxford: Oxford University Press.

9. The National Bank of Kazakhstan (2014) The Launch of Trading in Chinese yuan/Kazakhstani tenge pair on currency platform of Kazakhstan Stock Exchange JSC. Available: http://www.nationalbank.kz/cont/publish590280_25296.pdf [Accessed: 10 October 2017].

10. Fedorenko, V. (2015) Eurasian Integration: Effects on Central Asia. Washington, D.C.: Rethink Institute.

11. Middle East and Central Asia Department, International Monetary Fund (2015) Republic of Kazakhstan: 2015 Article IV Consultation-Press Release; Staff Report for the Republic of Kazakhstan. Washington, D.C.: International Monetary Fund.