Five months after Forbes magazine crowned Erlan Abdikarimov the best Facebook Inc. (FB) analyst, the 24-year-old Kazakh is out of a job as new rules in the Central Asian country force boutique investment banks like his to close.
IFG Continent was driven out of business last year for being unable to meet capital and trading-volume requirements that came into force Jan. 1. It was among the seven brokerages to shut in 2012, more than in the previous two years combined, central bank data show.
Abdikarimov is one of an estimated 600 people who have already lost or will lose their jobs as the number of Kazakh brokerages is culled to about 10 from 44 at the start of 2012, according to Orken Invest Jsc, one of the casualties.
“The conditions set out by the national bank for continuing operations on the securities market were unacceptable,” Orken Managing Director Damir Seisebayev said by phone from Almaty, the Kazakh commercial capital. “We were forced to give up a license that we received after five months of trying with great difficulty.”
Abdikarimov, a mining specialist, said by phone from Almaty that he was asked by clients for advice on Facebook last year as the Menlo Park, California-based company was preparing its public offering. After researching the social network and becoming a member, he figured it was worth $24.62 a share, the lowest among analysts tracked by Bloomberg at the time.
When Facebook went public at $38 on May 17, Abdikarimov recommended selling the stock, which plunged to as low as $17.55 on Sept. 4, data compiled by Bloomberg show. It declined 1.6 percent to $29.66 in New York on Jan. 18.
“It was sad because I had to give up on some of the projects I started,” Abdikarimov said of losing his job. “Smaller companies are more open to innovative ideas than bigger ones.”
Kazakh regulators said they’re concerned with strengthening the country’s markets before joining the World Trade Organization, which could lead to an influx of capital. Kazakhstan, which holds about 3 percent of the world’s oil and is the largest uranium supplier, expects to join the global trade arbiter by the end of the year.
The country of more than 16 million people is also embarking on the biggest sale of state assets since it won independence two decades ago. Its People’s IPO program will spur demand for financial services and generate a windfall in commissions for the few brokerages left, Orken’s Seisebayev said.
“An unprecedented number of investors,” about 34,000, took part in the first offering, last month’s sale of about 10 percent of pipeline operator KazTransOil (KZTO) for 28 billion tenge ($186 million), Seisebayev said.
Central bank Chairman Grigori Marchenko said the new regulations are aimed at strengthening the best brokerages and better preparing them to compete with foreign banks, the Kursiv newspaper reported in February. The amount of its own money a brokerage must have on hand to cover potential losses almost tripled to 692 million tenge.
“This decision was adopted with the aim of stimulating the domestic stock market,” Elena Nikiforova, head of the central bank’s financial oversight department, said by e-mail. “The changes will create additional opportunities for domestic brokerages to conduct business.”
JSC Halyk Finance, an affiliate of London-listed Halyk Savings Bank, the second-largest Kazakh lender by assets, applauded the changes that killed its smaller competitors.
“The regulator has decided to undertake measures to revitalize the sector of broker services, which we welcome,” Halyk Finance Chief Executive Officer Yerkebulan Tulibergenov said by e-mail. “The new requirements will allow the regulator to focus on a smaller number of players.”
Abdikarimov said that without employment offers on the table he’s left to ponder his professional future.
“I remain without a job,” he said. “The regulator’s actions have forced many players to quit the market, including my company.”
To contact the reporter on this story: Nariman Gizitdinov in Almaty at firstname.lastname@example.org
To contact the editor responsible for this story: Hellmuth Tromm at email@example.com