Second in a series of three articles on the economic climate in Kazakhstan.


ALMATY, Kazakhstan -- A podium for the floor manager, a small brass bell to signal closing and a wall chart for tallying trades are about all that greet the eye upon first inspection of Kazakhstan's Central Asian Stock Exchange.


Young, small and vulnerable, the bourse is located in a claustrophobic room on the third floor of a downtown office building. A lone strand of rope stretches across the floor to separate observers from participants on days when trading gets heated.


Those days, however, are few and far between, with exchange officials describing current trading only as "light." And with just eight companies listed, including several banks, a textile firm and a wood products company, it's no wonder.


Trading takes place for two hours a day, as much to get brokers in the habit as actually to trade, said one official, and seminars are continuing for the exchange's 24 registered brokers.


All eight companies listed on the bourse have zero liquidity. Likewise, no one has bothered to determine the market's capitalization, or value.


"It's not something we have attempted to calculate," said Erkin Bektaev, vice president of the exchange. "Due to the low liquidity, capitalization figures are not relevant at this time."


But all of these are short-term problems, bound to rectify themselves as the exchange grows and the number of players increases, according to David Spira, a consultant under contract with the U.S. Agency for International Development, which is helping start the exchange.


Known by its acronym CASE, the exchange opened its doors April 19 and is the offspring of the former Kazakhstan and Almaty Stock Exchanges, whose administrators realized the market was not big enough to support competing bourses.


Originally, the Kazakhstan and Almaty exchanges dealt mainly in veksels, a type of unbacked promissory note issued by the government or corporations and considered risky even in Russia's rough-and-tumble securities market.


"We wanted them to stop the practice, which we believed was not what an international stock exchange should do," said Spira. "They traded what was available and they were right to do that, but in 1995, with privatization, there's more you can do."


Now, CASE has gotten away from the unreliable instruments, and does business not only in the rudimentary equities market, but also in treasury bills sold on the secondary market through Kazakhstan's 15 primary banks. Most are three-month bonds, but the government recently issued an experimental tranche of six-month notes.


Unfortunately, much of Kazakhstan's T-bill trading takes place over the phone, in deals handled between individual buyers and sellers who do not see the need to pay a broker's a fee, Spira said.


It is a problem shared by Russia, where the president of the Moscow Central Stock Exchange was quoted recently as saying that "99.99 percent" of trading in domestic debt and equities occurred over-the-counter.


It is this private trading of T-bills, and an effort to tap that market, which has driven CASE into the computer age.


On July 3, the exchange placed terminals along two walls, further narrowing the traders' confines in a sacrifice to coax a larger percentage of the secondary market.


"Fundamentally, we're never going to attract all of this," said Spira. "We anticipate that the computers will make transactions a little more straightforward, and secondly it will reveal just the right amount of information about the buyer and seller."


But for equities trading, computers have been shunned in Kazakhstan's pits in lieu of the "open-outcry" system, which means traders shout their sales to a "chalkie" who marks trades on the wall chart.


Being an independent, not-for-profit business funded by brokers' commissions and company registration fees, computers will not enter the stage until volume dictates a need, Spira said.


Foreigners have paid some attention to the exchange, Spira said, where they can purchase stocks freely and up to 20 percent per issue of state debt instruments.


In Russia they are limited to 10 percent.


But whether the Almaty exchange is a shadow of its future self or a figment of overactive imaginations is a question left to the jury.


Some observers are skeptical.


"I personally don't see the capital markets being a big deal here for a while," said Fred Tresca, a partner in Price Waterhouse's Almaty office.


Instead, some experts said the small Central Asian markets might be better served by a form of regional exchange, as is being discussed by Turkish traders in Istanbul.


"My personal opinion is, if done properly, something like that is going to be more attractive to servicing Western capital," Tresca said.


"It would keep the market from being so thin," and allow investors greater diversity to manage the market's inevitable peaks and valleys, he added.