Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
March 08, 1999 12:00 AM

TRAVELS IN SEARCH OF VALUE: INVESTOR FINDS PRIVATIZATION, TASTELESS DECOR IN OBSCURE FOREIGN LANDS

Jim Bogin
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    On some trips you learn what not to buy. I joined 25 investors and executives from Global Securities Inc., an investment brokerage in Istanbul, Turkey, for a weeklong tour of central Asia with stops in Baku, Azerbaijan; Bishkek, Kyrgyzstan; and Almaty, Kazakhstan. Not surprisingly, the fact that so many people have been willing to trek to the ends of the earth coincides with the discovery that there is little to buy. Even so, we learned many useful things about obscure markets. A brief diary of the trip:

    Azerbaijan has only 7 million people. Many companies there have been slated for privatization. The only company that looks attractive on the surface is State Oil Company of Azerbaijan, known as SOCCA. An American oil man says in his opinion it would be difficult to pay too much for the oil company, given its massive reserves. Unfortunately, it isn't clear if holders of so-called privatization vouchers would be able to bid for SOCCA, as this will be decided by presidential decree.

    Our chartered Turkish Top Air 727, with two crews totaling 14 people (pilots can only fly so much per day), flies two hours eastward to Bishkek. I am going to a capital city I've never heard of. Bishkek, the capital of the landlocked secular Moslem state of Kyrgyzstan, is out in the steppes, just north of the northwestern Chinese border.

    The town is not distinguished. Most of the capitals of the old Soviet Union were designed in the same fashion: a white house for the government, a statue of Lenin, a plaza in memory of World War II heroes. Bishkek moves slowly -- elsewhere in the former Soviet Union the Lenin statues have all been removed.

    There is a rundown kind of department store, a variation of the independent department stores you occasionally find in old midsize towns in the United States. It is good to know that Japanese electronics and foreign videos are available, in case I ever get stuck there.

    Once again, just as in other stops on our itinerary, our group receives a series of presentations on the economy, including the inevitable phone company development. One woman cuts the Gordian knot of security analysis and makes an observation, saying, "No one is ever, ever going to call Kyrgyzstan." In any case, while valuations are low, they are not necessarily low enough.

    Approaching Almaty, the capital of Kazakhstan, air traffic control gives our pilot incorrect altitude data. But he is a specialist in flying to dangerous places and always checks coordinates himself.

    Unlike the other countries, where we breezed through immigration and had our passports delivered to us the next day, in Kazakhstan we are forced to fill out Russian forms in duplicate telling of our jewelry and cash. This is useful for the customs officers, who "shake down" businessmen and tourists for $10 or $20 with invented penalties and nonexistent taxes.

    We stay at the Ankara Hotel, which not surprisingly is run by Turks. It captures the quality and service of a very good Hyatt.

    Kazakhstan doesn't have a stock exchange yet (neither do the other countries we visited). But in our group of mainly stock market investors, some already hold Kazakh stock. There are several ways to do this. Some stocks trade over the counter. You simply send money to Global Securities, and it acts as your broker and custodian and holds the stocks for you. Four Kazakh oil companies had been auctioned off earlier in the year. They had gone up about 800% and are now bid only.

    The head of the National Securities Commission, who has just resigned, addresses us. He is trying to use his resignation as moral suasion for the government to hurry up the creation of a stock exchange, and to create it correctly. Some things bothered him: A draft has been put forth changing the composition of the board of the National Securities Commission to have four outsiders on a board of seven -- outsiders who might be cronies of the government.

    We fly to Pavlodar, a city of 150,000 people somewhere in the north of Kazakhstan. The city looks desolate. We have police escorts for our buses to the city hall, with journalists in the back and the deputy governor in the front. There are speeches thanking us and speeches by Global Securities thanking them for thanking us.

    The deputy governor then begins to read a speech in Russian, for which we have an English translation. At first our interpreter translates frequently, after several sentences. This is halted, and the governor just reads through his silly speech in Russian.

    In the speech, the word "portfolio" is translated as "bags." We "international bags investors" are obviously being given the big hello. The region's big selling point is that it is conveniently located at the crossroads of southwestern Siberia.

    We go to the local refinery. After three days of arriving places after midnight, staying up till 2 a.m. drinking -- I am a wimp, my fellow travelers were staying up until 4 or 5 -- the pace is catching up with some of us. I prefer to sit in the back row. The companies are not accustomed to nosy foreign investors, and information is not something to be shared willingly.

    Karaganda, a large Kazakh city of about 1 million people, has built a big airport, obviously designed by the finest Russian airport architects. There are only a couple of flights per day. The Karagandans have decided that if they make access easy to their distant land, then foreign investors will flock there. This is the "If you build it, they will come" method of attracting direct foreign investment.

    In the area, there are homes suitable for families of one, and pens for livestock. But there are no people. It appears to be a huge ghost town. Had these been labor camps in the past? Hard to know.

    The new freedoms have led to some tastelessness in decor. A bus we take for an investment tour has a large poster protected by plastic of an attractive nude blonde woman in some tropical clime. Two fund managers have their seat just in front of this and have to stare at the young lady for the duration of the ride.

    One destination is a steel factory that has been taken over by an Indian multinational, a global organization called Ispat International Group, which is trying to turn it around. It is massive, a vast expanse of land is covered by pipes, tubes, factories and smokestacks, producing 4 million tons of hot rolled coil. Members of the group ask the usual questions about quality, sales, pricing, financing and transport logistics. I ask why there is an elite force of six camouflaged guards with automatic weapons hidden under their vests manning each entrance to the room. I am told it is out of respect for us foreign visitors.

    My trip nears its end. At 1 a.m. on a Friday, I am in the basement disco of the Ankara Hotel with the remnants of the group, waiting for dawn and our 5 a.m flight to Frankfurt, Germany. The others have taken a Turkish charter to Istanbul. We are five bleary-eyed investors, who in a few hours have to leave for the airport. The long-awaited floor show begins, with scantily dressed women in quasi-native dress.

    A magician appears in the show. He selects me as his helper and I walk onstage. He puts a silly tuxedo jacket on me, but secures my arms to my sides with Velcro and stands behind me with his hands through the sleeves, so that he is the hands and I am the head and body. We do simple magic tricks. The topless dancers come out. To honor me for my ordeal, they each sit briefly on my lap. It is time to go home.

    Jim Bogin is president of Legend Capital Management Inc., which manages a private global value investment fund, and he is a Japan analyst for Matthews International Capital Management LLC, a mutual fund manager specializing in Asian investments. Both firms are in San Francisco

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Private Markets
    Sponsored Content: Private Markets

    Reader Poll

    August 10, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Gaining Momentum: Where Next for Trend-Following?
    The market opportunity in U.S. residential mortgage-backed securities
    Credit Indices Evolve with Enhanced Data Inputs
    Hedge Funds 2.0: Back to the future
    How Has 2022's Carnage Reshaped Global Stock and Bond Markets?
    Crossroads: Politics, Inflation, & Bonds
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    August 1, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit