Fund managers diary

Javier Garcia is manager of the Julius Baer Black Sea Fund, Swiss & Global Asset Management. His diary runs from September 6-10.


This week I will travel to Kazakhstan. The country is best known for its oil reserves, and while it is no bad thing to have high exposure to this increasingly scarce commodity, times are changing. The sectors we focus on in Kazakhstan include uranium, copper, iron ore, fertilisers and junior mining in the oil, gas and gold sectors. Visiting the country is the best way to get a snapshot of the economic and corporate climate and I am looking forward to the trip.


I finish my research to ensure I am well prepared for the heavy meeting schedule. Kazakhstan plans to double its oil production within the next decade. An injection of foreign money will be required to increase export capacity and both businesses and the government are keen to engage with western investors. Investor interest from the developed world and from China suggests that it will not be a challenge to attract investment funding and the country is one to watch. (article continues below)


After a 10-hour flight I arrive in Astana, Kazakhstan’s new capital city. It is 6am (four hours ahead of GMT), the weather is warmish and I haven’t slept much.

All important state officials are based in the capital and a series of fascinating meetings await me. I see, for example, representatives of the Development Bank of Kazakhstan or Samruk Kazyna (the national welfare fund) and the message is clear. The main goal is to diversify the economy towards technology and infrastructure and try to soften the dependency on commodity exports. An intense day ends with my night flight to Almaty with Air Astana. The noise of the engines rocks me to sleep and I even miss the drinks trolley.


If Astana is the city of the government, then Almaty is the city of the corporate. All the major players are based in the former capital city. I meet people from one of the biggest banks in Kazakhstan.

The country went through its own liquidity crisis in 2007, having been one of the most leveraged banking systems in the world. The level of non-performing loan reached about 35%. The banks have recovered following state intervention and are much better financed. They are still in a deleveraging phase and no loan growth is expected in the short term. I have an amazing dinner and sample all the local delicacies, including the horse and camel-milk alcoholic drinks.


Finally I sleep for longer and my batteries are turbocharged. Today is the commodity compendium day. I go from fertilizers, through oil, gold and uranium within hours. Kazakhstan is one of the most resource-rich countries in the world with strong production growth dynamics for the next decade. These resources are needed in neighbouring China. Because of low energy and input costs you can find many so-called “new champions” in these sectors, most of them trading at unjustified discounts. How time flies.

The week is almost over. I have another fantastic dinner and catch my flight at 2am. I will need the whole weekend to recover. After conversing about the football World Cup I have an idea for my presentation at a frontier markets conference next month. Paul, the psychic German octopus, says Kazakhstan will outperform. I rate the country a strong buy, but based on slightly different parameters, for example the lack of a McDonald’s or Starbucks demonstrates how unexploited the country is.