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Dynamics of Monetary Base and Foreign Reserves of the RCB in 650 38,37,Monetary Base (bln. rub.) 36,Foreign Reserves (bln. doll.) 35,34,33,32,31,30,29,28,480 27,As we predicted, the reduction in the compulsory foreign reserves grew by $700 million. However export receipts sales rate did not affected the the total increase in foreign reserves of the Bank of dynamics of foreign reserves (see Fig. 2). In Russia during three weeks of September was rather particular, for the third week of September the modest (about $300 million). The external factors % a week 1-7.1.2-8.7.9-15.4.7-13.5.4-10.6.15-21.1.12-18.2.12-18.3.23-29.4.21-27.5.18-24.6.16-22.7.13-19.8.10- dollars bln. rubles 1-7.1.2-8.4.2-8.7.3-9.9.8-14.1.5-11.2.5-11.3.9-15.4.7-13.5.4-10.6.9-15.7.6-12.8.15-21.1.22-28.1.12-18.2.19-25.2.12-18.3.19-25.3.16-22.4.23-29.4.14-20.5.21-27.5.11-17.6.18-24.6.16-22.7.23-29.7.13-19.8.20-26.8.10-16.9.17- their role: after the terrorist attacks against half year (since April 2001) the multiplier actually the US and turbulence in the world financial discontinued its growth. In our view, this fact is system the Bank of Russia was compelled to spend related to a maximum monetization level, up to $500 million to ensure liquidity in the mentioned in our review in August (See Russian market. Economy in August 2001. Trends and Outlooks.

M.: IET, 2001. Section Monetary policy.). At the On September 6, 2001, the Bank of Russia held same time the share of non-borrowed reserves of auctions to place two issues of the CBR bonds commercial banks in the reserve money continued totalled up 4 billion roubles. However presently to decline. Thus, in summer 2001 the balances on these securities have not enjoyed an actual correspondent and deposit accounts of commercial demanded. Only some 21% of supplied bonds was banks with the Bank of Russia fell to 2223% of placed at the average yield about 9.8% annualised.

the reserve money compared to 27.528.5% In September 2001 the Bank of Russia published reported in the first and second quarters of 2001.

the data on dynamics of monetary aggregates over The cash to compulsory reserves ratio remains the eight months 2001. The money multiplier (Mstable (cash accounts for about 80% of the money to reserve money ratio) rose approximately by 10% base). Thus, despite growing crediting the vs. the beginning of the year (from 1.55 to 1.70) economy, the credits to a great extent are still and by 19.5% as to its minimum (July 2000). The converted into cash (e.g., in wages and salaries), current level (about 1.7) corresponds to values and multiplication chains in the Russian economy noted between late-1998 early-1999.

are short.

Nevertheless, it is worth noting that during the last FIGURE 3.

Money multiplier (M2/Reserve money) in 1997 through IQ2,1,1,1,1,1,1,S. Drobyshevsky.

Financial Markets The government securities market maximum yield on eurobonds dropped to 12.5% annualised. The minimum yield on the Minfin The development of prices for the Russian foreign bonds was fixed on September 6 from 11.9% to debt securities in September 2001 could be divided 14.6% annualised.

into two periods, due to the acts of terrorism in the USA (see Figs. 1 and 2). During the first decade of The shocks in the world financial system during September the quotations grew, supported by the the second week of the month (interruption in increase of the Russia sovereign rating by Moodys trades in the USA and in London, fall of many from B3 to B2 (positive). By September 10 the stock indices), as one could expect, had negative Jan Jan Jan Jan Sep Sep Sep Mar July Mar July Mar July Mar July Nov Nov Nov May May May May impact, and prices for the Russian liabilities were 13.25% annualised. The yield on eurobonds going down until late-September. By the end of the matured in late-November 2001 have found month the yields on the Minfin bonds grew up to themselves within the range of 3.13,7% 13.516% annualised, and on eurobonds up to 9 annualised.


Dynamics of Minfin bonds quotations in June through September Tranche 4 Tranche 5 Tranche 6 Tranche FIGURE 2.

Dynamics of quotations of the Russian eurobonds with maturity in 2001, 2007 and 2028 in June through September USD-2001 USD-2007 USD-The market for domestic debt in September 2001 placement of new securities (five-month GKO and showed its independence of external factors. The four-year OFZ) totalled up to 10 billion roubles.

GKO and OFZ yields continued to decline during Thus, the auction on placement of OFZ was the whole month, and by the 20s of the month the declared abortive, since the investors bids seemed average-weighted GKO/OFZ yield to maturity fell to the RF Ministry of Finance very high, and only to 15% annualised. At the same time, in September 48% of the supply were placed at 13.9% the RF Ministry of Finance failed with a successful annualised average-weighted yield. market $249.9 million. In September, the daily average trade volume rose by nearly 24% compared to The boom on the Russian stock market, which had August and amounted to $12.5 million. The started in late August, came to an end with the weekly average trade volume was about $62.events in the USA and subsequent fall in the world million. Between August 31 to September 11 the financial markets. The absence of large foreign RTS index fluctuated within the range of 205-investors ensured a relative independence of points. It is worth noting that the monthly domestic market of the price decline abroad.

maximum - 210.79 - was reached on September 4.

However a sharp downfall in oil prices induced a Further, being influenced by the situation in world loading-off of stocks of oil companies and the fall markets, the Index dropped, and on September of the RTS index.

it reached 176.79 points, which is the minimum Overall, the RS index went down by 25.6 points value since April 25, 2001. During the last day of (12.01%) over the month, the trade volumes the month the Russian stock index went up to remained negligible growing by 7.3% at the most 180.25.

relative to August. Thus, the turnover made up FIGURE 55000000 The total volume of trading ($) The RTS Index 0 As noted above, in September the prices for the (25%, correspondingly, in August), LUKoil Russian stocks found themselves affected by 20.90% (15.2%), Surgutneftegas 10.59% (8%), external factors. The leader among blue chips YUKOS 10.43% (25.1%), Mosenergo became the stocks of Rostelecom (-28.19%), 4.70% (3.49%). Thus, in September the total share followed by MMC Norilsky Nickel (-19.20%) of the five most liquid stocks in RTS declined to and RAO UES Russia (-18.75%). The quotations 76.58% (in August 79.6%).

of stocks of oil companies declined to a less extent:

During last month, the trade volume on Gazprom Surgutneftegas by 14.98%, Tatneft by stocks in RTS amounted to $36.3 million (76.13.53%, LUKoil by 13.21%, YUKOS by million stocks), with 3581 deals on them 11.19%. The last was stocks of Sibneft minus concluded. Between September 17 to September 5.61%. Despite the general bearish pattern, the 21 1050 deals with Gazprom stocks were Aeroflot stocks appreciated by 4.33%, however, concluded, which became the maximum amount their trade volume was the least among all blue for the whole time of Gazprom trading in the chips.

RTS. The peak was recorded on September 17 In September the RTS trade volume consisted of 334 deals.

common stocks of RAO UES Russia 29.95% US dollars points Dynamics of the Russian Blue Chips between August 31 to September 28, 10% 5% 0% -5% -10% -15% -20% -25% -30% Change in price (%) On September 19 the RTS forward market However the sharp decline in oil prices observed (FORTS) was opened under the agreement on during the last week of September heavily affected establishment of united market for futures and the Russian stock market dominated by oil options between the RTS and the Saint- companies. On September 25, the oil price went Petersburg stock exchange. Meanwhile, the down by $4.25 (-17.1%) at once and reached the futures on RAO UES Russia, Gazprom, minimum value of 20.6 $/bbl. That day the RTS LUKoil and Surgutneftegas stocks and options index dropped by -6.82 points (-3.7%). The largest on RAO UES Russia and Gazprom stocks are fall was recorded with regard to the stocks of traded in FORTS. For the first hour of trades the Sibneft 7.9%, followed by Surgutneftegas turnover exceeded 15 million roubles (147 deals, 6.5%, LUKoil and Tatneft 5.9%. The 5206 contracts). For one and a half weeks the trade smallest fall was fixed with respect to YUKOS volume exceeded 500 million roubles. Notably, on stocks 4.2%.

September 25 the maximum amount of contracts On September 19, the American Oil Institute on the Saint-Petersburg stock exchange (7-year reported an increase in oil reserves in the USA.

life) was fixed 38590.

The reserves of jet fuel grew at the most, because Since October 1, the list of stocks used for the RTS of the suspension of flights. At the same time, the index calculation was changed. Because of closing down of several oil terminals induced company restructuring, the common and preferred ceases in oil delivery, and the crude oil reserves stocks of RAO Norilsky Nickel were replaced by declined. On September 26-27, the situation in the the stocks of MMC Norilsky Nickel. oil market was discussed on the OPEC Conference.

The countries OPEC members decided on The external factors that affected the Russian stock remaining quotes unchanged, but this decision is market were mainly those related to the accident in subject to revision, should the situation worsen. In the USA. The destruction of the World Trade general, the state of the world oil market is Centre and expectations of the US striking back determined by expectations on world recession and provoked a collapse in main world markets. The decline in the demand for fuel3.

trades on the NYSE were stopped between September 11 to September 17. For the week of 17.0921.09 the US stock indices fell considerably: the DJ lost 7.68%, Nasdaq 9.9%, and S&P 7%. On September 20 the S&P closed at below 1000 points. Interestingly, the RTS index slid by only 3.3% against such a background.

Details see in section Oil and gas sector.

t l t l s a a i f ft i e i m o as o go o l s o r g f ss ne ck e e t o i bne t Uk ek r UK en Si Ta Rus el Ru L s f nef Ae st o ky N o o ut s M l g R i nk r a ur o S rb N e RAO UES K Sb M G FIGURE 5.

Dynamics of Brent Oil in the USA (NYMEX) 25.01.00 28.03.00 22.05.00 18.07.00 12.09.00 07.11.00 03.01.01 28.02.01 27.04.01 20.06.01 15.08.Without waiting for the Open Market Committee reduce interest rate, declaring that in the long run meeting scheduled for October 2, on September the American economy was subject to the risk of 17, the FRS reduced the federal funds rate once recession risk, rather than inflation.

again by 50 basic points to 3.0%. On October 2, To support the Eurozone economies, on September the rate was reduced to 2.5%. This decision was 17 the ECB dropped its interest rate by 0.dictated by an aspiration to support a stable percentage point - to the level of 3.75%. The functioning of financial markets after September Central Banks of many other countries also 11. The FRS demonstrated its commitment to lowered their key rates.


140% 130% 120% 110% 100% 90% 80% 70% 60% Dow Jones Industrial Average Nasdaq Composite 50% RTS Index 40% 30% 01.02.00 26.03.00 19.05.00 12.07.00 04.09.00 28.10.00 21.12.00 13.02.01 08.04.01 01.06.01 25.07.01 17.09. dollars per barrel Corporate news In the first half year the MMC Norilsky Nickel net profit amounted to 22,754 million roubles, i.e.

Further steps on the way of the Gazprom stock by 0.6% below the respective index of last year.

market liberalisation were made President Vladimir Poutin approved the plan, worked out by The net profit of the RAO UES Russia in the the task force. Now foreign investors are allowed first half - year accounted for 14.7 billion roubles to purchase domestic stocks and to convert them (according to the Russian accounting rules), i.e. into ADR. We should note, however, that the share billion higher plus vs. 2000.

of foreign capital in the company is still limited by The list of securities traded in the RTS was joined 20%, the trading and settlement procedures are by common and preferred stocks of Baltika rather cumbersome, and the separation of the brewery.

markets for the company shares actually still is in The completion of the scandal around the position place, although getting a softer from.

of Mosenergo Director General and the LUKoil started placing of 16,568.939 common appointment of an acting Director General led to stocks at a market price plus 15 cents. The market an increase in companys stock prices in earlyprice is calculated by the RTS on the day September.

preceding to the bidding one. The LUKoil net The Petersburg Telephone intends to change its profit, calculated in compliance with the US name for North-West Telecom. Under the GAAP standards, amount to $690 million in the Svyazinvest restructuring program, the first quarter of 2001. The Standard&Poors rating Petersburg Telephone issued 262.896.agency increased long-term credit ratings of common stocks and 87.646.542 preferred stocks.

LUKoil and Tataneft to B and B-, The securities of eight regional telecommunication respectively. LUKoil also holds the top line in companies were consolidated. In late-September the annual rating of the biggest trans-national early-October the Petersburg Telecom will companies in the Central and Eastern Europe issued the first - level ADR. Also we should note published by the UN.

that in September the Petersburg Telecom became the leader in the RTS, quotations of its stocks grew by almost 30%.

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