Dresdner Kleinwort expects to close a consumer loan securitization from Kazakhstan this year, according to Sandeep Reddy, vice-president of the securitized and principal finance group. The deal will be in dollars, while the collateral - reflecting the makeup of the asset class in general - is a mix of dollars and tenge. "So we'll have the requirement of a medium-term tenge-dollar swap," Reddy said.

Kazakh banks are looking primarily for dollar funding, and securitizable assets are largely in, or indexed to, dollars. But that is changing. "[Consumer loans] are becoming more tenge-denominated as the currency strengthens, and people grow more comfortable with the local currency," Reddy said.

Some consumer loans offered by Kazakh banks are secured by property, which gives them the character of a second-lien loan. They are structured with tenors of up to 20 years; the long term provides a tax benefit for borrowers. "The reality of these loans is that people normally repay them within a few years, as with most consumer loans," Reddy said. "There's no prepayment penalty. They're designed to be prepaid."

On the straight mortgage front, Reddy expects more RMBS to come out of Kazakhstan in 2007. ABN AMRO brought the country's first term deal earlier this year, for BTA Ipoteka, a unit of Bank TuranAlem. "The mortgage market's booming, especially in Almaty. That's where the property market's very strong," Reddy added.

Indeed, all indicators point to a brisk mortgage business in Kazakhstan. The government has given housing construction pride of place in the country's development strategy until 2030, according to a recent report by Moody's Investors Service.

Underscoring the country's future potential in the RMBS sphere, the ratio of mortgage loans to GDP was 5.1% at the end of 2006, tiny by the standards of Western Europe or the U.S. Still, it is significantly higher than the figure for other ex-Soviet countries. The total value of outstanding Kazakh mortgages at the end of 2006 was $3 billion, Moody's said.

The property market in the U.S. dollar or dollar-index is most developed in Almaty, the financial capital, and Astana, the political capital. Rates are no lower than 12% on a fixed basis. In tenge, they are even higher.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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