Clare Nuttall in Almaty -

Since it set up shop in Kazakhstan in 2007, the Russian investment bank Renaissance Capital has built up a 45-strong team covering the Central Asia and Caucasus region from its base in Almaty. The firm's long-term strategy now includes the expansion into the region's next two largest economies, Uzbekistan and Azerbaijan.

Concurrent with this is a move to develop the range of products that Renaissance offers in the region. It already provides a full range of investment banking services including trading and brokerage, research, mergers and acquisitions and debt finance.

"I can't go into details at present, but we are planning to build out asset management and private equity business - we will grow with the market," says Adel Kambar, the head of Renaissance Capital Group Central Asia since May 2007. "We are very confident about Kazakhstan - this is a $100bn economy, with a very under-served client base."

None of the major western investment banks have set up a permanent presence in Kazakhstan yet, preferring to operate with the "suitcase banking" model - flying in for specific deals. Aside from its local competitors, Renaissance virtually has a clean sweep of the market, though this is on the verge of changing; the entrance of one of Renaissance's Moscow-based competitors Troika Dialog - through the acquisition of 100% of Almex Asset Management in March - could be the start of a wider trend of foreign banks entering this attractive and relatively untouched market. However, Kambar reckons there will be plenty of foom for Troika and other potential competitors as the local economy grows.

Despite the effects of the global credit crunch in Kazakhstan, Kambar says that the financial markets are still open, though the picture is very different from a year ago. "Raising finance is probably difficult anywhere in the world right now," he says. "Vanilla debt in particular is difficult to raise, more so than some of the structured products."

And while there were four major IPOs of Kazakh companies on the London Stock Exchange - ENRC Group, Alliance Bank, Kazakhstan Kagazy and Chagala - last year, few expect that to be repeated in 2008. "Fundamentally, there are lots of good companies in Kazakhstan, but you have to link this to what is happening in the world. There might be some this year, but not in the same volume. Most will probably wait until 2009," says Kambar. "However, it's early days - we're only in March and I wouldn't write 2008 off just yet."

Overall, Kambar stresses that the problems that beset the Kazakhstan economy during last year were more of a temporary stumble than a long-term problem for the country. "Since its first linkage to the financial world, Kazakhstan has been a bull market. Now it's strongly bearish, but this is something that happens in every economy - it's a question of learning from experience."

Keeping up with the neighbours

Most neighbouring countries are also considered to be on a long-term growth path. And if Kazakhstan is under-banked, its neighbours are even more so, making a widening of Renaissance's presence in Central Asia and the Caucasus a logical step. Indeed, it's already considering opening an office in Tashkent. "We are very bullish about Uzbekistan. This market is both underserved and under-educated - by which I mean that other international banks are not educated about the opportunities in Uzbekistan," says Kambar.

He cites the country's large and rapidly growing population (at around 27m, by far the largest in Central Asia). As well as its natural resources - in particular copper, gold, natural gas and uranium - the country also has a well developed manufacturing industry. To date it has been a relatively uncharted territory for international investors, but there are signs it will become a more mainstream location in the near future.

The other obvious target for Renaissance to grow its business is in Azerbaijan, which is currently in a period of very rapid economic development. GDP growth came in at an astonishing 24.7% in 2007, which was actually down from the 34.5% hit in 2006.

"At present we service Azeri companies from Almaty," explains Kambar. "Oil is the primary business in Azerbaijan and the economy is very much structured around that." However, the economy is starting to diversify, with government investment in roads and other infrastructure projects, and increasing private sector activity.

But while focusing on the region's largest markets, Renaissance is also alert to opportunities in smaller countries such as Kyrgyzstan, Tajikistan and Turkmenistan. "The whole of Central Asia is potentially highly interesting," says Kambar.

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