Kazakh groups to snub London

Companies from Kazakhstan plan to move some of their fundraising away from London, according to the country's central bank governor, because UK investors failed to stand by the central Asian state during the financial crisis.

"Over-relying on London was a mistake because too many people ran away in the crisis and proved to be our fair-weather friends," said Grigory Marchenko in an interview with the Financial Times.

Kazakh companies would now look to the Middle East and Hong Kong, as well as London, when raising money - which will mean London's share of future fundraisings will fall from about 90 per cent before the crisis to perhaps 50 per cent, he said.

Mr Marchenko's words will be treated seriously in financial markets as he is one of President Nursultan Nazarbayev's closest economic advisers.

He ran the Kazakh central bank in 1999-2004 before spells as deputy prime minister and head of Halyk Bank, a leading commercial bank. He returned to the central bank this year to help the country out of the global financial crisis.

Mr Marchenko predicted that, with market sentiment and the Kazakh economy both recovering, Kazakh companies would return to the capital markets next year - going first to Hong Kong, in the spring, and only later to London, in the autumn.

"London investors were talking about long-term commitment, but in 80 per cent of cases it was not true," Mr Marchenko said. "We made the mistake of not paying enough attention to Hong Kong and the Middle East because it was way too easy to raise money in London."

Mr Marchenko said it was not a question of abandoning London, but of diversifying towards Asia, which was seeing faster economic recovery than Europe or North America.

Also, as a neighbour of China, it made sense for Kazakhstan to develop closer ties with the Asian country.

China is investing heavily in natural resources and transport links in Kazakhstan, including gas and oil pipelines. Hu Jintao, the Chinese president, is due to visit Kazakhstan this week.

Mr Marchenko forecast that Kazakhstan would avoid registering a recession for 2009 as a whole, thanks to the recovery in commodity prices and the government's $19bn (€12.7bn) 2008-09 economic support package, which was part funded by the state's oil-financed reserve.

The central bank predicts gross domestic product growth of 0.1-0.3 per cent for the year, compared with forecasts by some outside observers of a 1-2 per cent decline.

Some $10bn of the economic support package, which has been spent on projects ranging from infrastructure to bank recapitalisation, had come from the National Fund, the state's long-term oil-financed reserve, Mr Marchenko said. Next year's outlook would depend on commodity prices, he added.

The Financial Times