OREANDA-NEWS. April 13, 2011. Following a decision of Kazakhstan Stock Exchange (KASE) Board of Directors the reviewed edition of KASE internal document "Methodology of Securities Valuation" (Methodology) has been approved, reported the press-centre of KASE.

The need for a revised edition of the Methodology was caused by the following reasons:

- the current edition of the Methodology does not specify the procedure for evaluation of some types of securities (e. g. MAOKAM, bonds of international financial institutions);

- in accordance with the current edition of the Methodology yield values of non-indexed government securities of the Republic of Kazakhstan (GS) with maturities of more than 1,460 days are determined according to data from offering auctions and/or additional offering auctions for such GS, which does not make it possible to take account of the secondary market's   conditions at their valuation, and also leads to over-valuation or under-valuation of some securities of this type;

- the Methodology's current version stipulates valuation of "short" GS by using the logarithmic trend equation whose chart has a standard look, which in some cases does not make possible calculation of correct values of market prices of such GS;

- in accordance with the Methodology's current version it is not possible to correctly calculate market prices of corporate bonds with complex structure traded on KASE at "dirty" prices (taking into account the interest accrued, but not paid) or at "net" prices (taking into account the interest accrued, but not paid), however with no possibility of calculating their yield by the trading system.

In addition, amendments had been made to the Methodology multiple times which significantly complicated the document's structure.

The following amendments have been introduced into the Methodology:

- the order of GS grouping for their valuation has been changed;

- the procedure for valuation of non-indexed GS has been changed;

- approach to valuation of corporate bonds has been changed;

- criteria used for separation of shares in liquid and non-liquid ones for their valuation have been changed;

- a procedure of valuation of securities not valued so previously has been determined;

- discount rates for market prices of corporate bonds designed for their use in auto repo transactions have been changed;

- discount rates for market prices of GS designed for their use in auto repo transactions have been adjusted due to a change in the CS grouping procedure.

As a result of the amendments made:

- all non-indexed GS (MEKKAM, MEOKAM, MEUKAM and notes of the National Bank) have been united in one group; their valuation will be made based on yield values which were obtained by approximating of transactions' parameters 60 calendar days before the valuation date;

- indexed GS (MOIKAM, MEUJKAM and MUIKAM) have been united into one group; their valuation will be made based on the projected (according to the inflation rate) yield to maturity;

- MAOKAM have been groped separately; their market prices will be calculated based on their yield values from transactions in the past 15 effective days preceding the valuation date (if the number of effective days is not sufficient - based on the value of the security's current coupon);

- the procedure of valuation of municipal GS has been changed; however it remained similar to the procedure of valuation of corporate bonds;

- the procedure of valuation of foreign government (FGS) securities and securities of international financial institutions (IFOS) has been determined similar to the procedure of valuation of corporate bonds issued according to the legislation foreign states;

- Criteria of shares' liquidity have been removed from the Methodology; and for the market valuation the lists of liquid and non-liquid shares will be used with the lists being drawn up according to KASE internal document "Methodology of Securities Liquidity Indicators Defining";

- corporate bonds are valued at the price of the best ask quotations (and not at the yield of those quotations, as it was the case before), whereas:

  - bonds traded in "net" prices, are valued daily ("net" price determined based on the best ask prices once a week, plus the interest accrued as on the date of valuation);

  - bonds traded in "dirty" prices are valued once a week based on the best ask quotations.

The text of the Methodology will be published on the KASE website, at http://www.kase.kz/ru/normative_base - section-2 in the nearest time.

The Methodology has been submitted to the Agency of the Republic of Kazakhstan on Regulation and Supervision of Financial Market and Financial Organizations (FSA) for approval and will be made effective after its approval by the said agency, based on a separate decision of the Management Board with simultaneous acknowledgment of the Methodology's previous edition as invalid.