J.P. Morgan puts Kazakhstan's local-currency bonds on GBI-EM watch list

J.P. Morgan has placed Kazakhstan's local-currency government bonds on Index Watch Positive for potential inclusion in its Government Bond Index-Emerging Markets (GBI-EM), the National Bank of Kazakhstan said in an announcement on 8 October. J.P. Morgan issued the notice on 7 October.

If Kazakhstan is added to the GBI-EM Global Diversified Index, its preliminary weight would be 0.48 per cent, the National Bank said, citing J.P. Morgan's assessment. The country would join China, India, Indonesia, Mexico and others in the benchmark, which the central bank described as one of the leading references for local-currency government debt used by global institutional investors.

What J.P. Morgan pointed to

The National Bank said J.P. Morgan's report notes growing participation by foreign investors and a positive assessment of the primary dealer system introduced to support liquidity in government securities. Average monthly secondary-market trading volume has risen 86 per cent since the start of the year, J.P. Morgan figures cited in the announcement show.

The report also credits regulators with a series of initiatives. These include the Capital Markets Kazakhstan information portal, a Bond Market Guide for foreign investors published with the support of the Asian Development Bank, and Kazakhstan's participation in the ASEAN+3 Bond Market Forum, the National Bank said. It names both the National Bank and the Agency for Regulation and Development of the Financial Market as the regulators behind the measures.

Development of international settlement and depository infrastructure "remains one of the key priorities", the National Bank said. Settlement and depository infrastructure is also one of the three areas J.P. Morgan will assess.

Twelve months to prove access

Index Watch Positive status runs for up to 12 months. During that time J.P. Morgan will assess further improvements in market liquidity, market accessibility for international investors, and settlement and depository infrastructure, the National Bank said. The announcement does not set an inclusion date or list the eligible bonds.

The Finance Ministry said the status was assigned as part of J.P. Morgan's 2026 index classification review and that the assessment will cover investors' access through international clearing and settlement infrastructure and the liquidity of bonds that meet the index's eligibility criteria, the Astana Times reported on 8 October. The newspaper said the move reflects joint efforts by the Finance Ministry and the National Bank to develop the government securities market and improve investor access.

The central bank argues that the broader investor base is already helping. It said in the announcement that the expansion is "contributing to increased demand for local government securities and a reduction in Kazakhstan's borrowing costs".

Outreach and the macro backdrop

The designation followed investor outreach by the central bank. On 16 September Deputy Governor Akylzhan Baimagambetov spoke at J.P. Morgan's Emerging and Frontier Markets Opportunities conference in London, in a session titled "Kazakhstan: The Sustainability of Disinflation", the National Bank said. A series of bilateral meetings was held with representatives of about 50 major international investment funds and companies, including J.P. Morgan Asset Management, Goldman Sachs Asset Management, Allianz Global Investors, Pictet Asset Management, T. Rowe Price, HSBC Global Asset Management and the Qatar Investment Authority. The presentation covered the launch of a primary dealership system with the Ministry of Finance, improvements to settlement infrastructure and cooperation with international clearing systems.

The domestic rate backdrop remains tight. The base rate stood at 16.25 per cent after the 4 September cut, against annual inflation of 9.8 per cent in August, a gap of about 6.5 percentage points on those two figures. The bank forecasts inflation of 9 per cent to 11 per cent for 2026 and said the scope for further rate cuts is limited.

The sovereign credit backdrop is stable. Moody's affirmed Kazakhstan's rating at Baa1 with a stable outlook, citing sound public finances, low government debt and substantial international reserves, the National Bank said in a statement dated 29 September.