change in 2000 and 2001 was low (5.5–6.5% of toThe Russian Central Bank reported the M2 vol- tal expenditure), it is evident that the share of cash ume accounting for 1439.1 billion roubles, as of balances and savings in banking deposits rose.
end-October 2001. That is at 25.76% higher than FIGURE 3.
140 Real M2 (December 1997 = 100) Real balances on ruble accounts of enterprises (December 1997 = 100) Real balances on people's accounts in commercial banks (December 1997 = 100) S. Drobyshevsky.
Financial Markets The government securities market. alised (the 5th issue of Minfin bonds) and the miniThe rise of quotations of the Russian foreign li- mum one – to 5–6.5% annualised (eurobonds-abilities noted over October and November discon- and -2030). This stabilisation of yields was caused tinued yet in early December 2001 (see Figs. 1 and by a number of factors. First, in December the eco2). During the whole month the yields on Minfin nomic and financial situation in Argentina deteriobonds and eurobonds were actually stable. There- rated, and the President and the Government had to fore, by the end of year the maximum yield on the resign. In addition, the events in Argentina, namely Russian securities amounted to about 13.2% annu- the failure of currency board regime, have made the Jun Jun Jun Jun Oct Oct Oct Oct Feb Feb Feb Feb Apr Apr Apr Apr Dec Dec Dec Dec Aug Aug Aug Aug common views on financial stability of emerging dition, the current yields on the Russian securities markets questionable. Second, during the month appeared quite low for assets with a similar risk there was an uncertainty about future dynamics of rate, even despite the upgrading of Russia’s soveroil prices and, therefore, Russia’s capability to pay eign rating in November and December to B+ its debts in 2002. Third, it is evident that many in- (Standard & Poor’s) and Ba3 (Moody’s).
vestors sold bonds to fix their annual profits. In adFIGURE 1.
Dynamics of Minfin bonds quotations in September through December Tranche 4 Tranche 5 Tranche 6 Tranche FIGURE 2.
Dynamics of quotations of the Russian eurobonds with maturity in 2003, 2007 and 2028 in September through December USD-2003 USD-2007 USD- 03.09.06.09.11.09.14.09.19.09.24.09.27.09.02.10.05.10.10.10.22.214.171.124.126.96.36.199.31.10.05.11.09.11.14.11.188.8.131.52.184.108.40.206.05.12.10.12.220.127.116.11.24.12.03.09.06.09.11.09.14.09.19.09.24.09.27.09.02.10.05.10.10.10.15.10.18.104.22.168.22.214.171.124.05.11.09.11.126.96.36.199.188.8.131.52.30.11.05.12.10.12.14.12.184.108.40.206.In December 2001 the situation in the market for as well as their yields will come to the previously domestic debt was unstable. The GKO-OFZ rates reported level (14.5–15% annualised, i.e. securing fluctuated rather strongly (over several last zero real yield).
months), while the average-weighted yield to ma- Stock market.
turity has peaked up to the highest values since The RTS Index grew over 10% the third month August 2001 (about 16% annualised). The main running, while the background for that has not been causes of instability in the market were the accel- favourable. Disputes between independent oileration of the growth in the dollar exchange rate exporters and OPEC regarding reduction in quotes growth and fluctuations in liquidity. The downfall caused uncertainty in the market for energy reof the rouble and the need for liquidity in the bank- sources. The economic crisis in Argentina, which ing sector intensified selling securities in the first crowned with resignation of the President and the half of the month. Thus, the average-weighted Government and the nation’s actual default on forGKO-OFZ yield grew up to 17.5–18% annualised. eign debt also discouraged investors. The situation However the redemption of OFZ No. 25030 (on in the industrially developed countries in not safe as December 15), which were issued under restructur- well. Thus, the growth rates of Japanese economy ing of GKOs and OFZs frozen in August 1998, are negative the second quarter running, the US brought up to 19 billion roubles to the market. GDP fell by 1.3% in the 3rd quarter of 2001 (the Partly these funds were reinvested and by the end earlier forecast was -1.1%), the leading German of the month the GKO-OFZ yields slid below economic institute IFO predicts a crisis in the euro15.5% annualised. It is evident that as the attack zone, unless the ECB substantially reduces its key against rouble vanishes and attractiveness of trans- interest rate.
actions with foreign currency reduces under the current level of inflation, the demand for securities FIGURE The total volume of trading ($) The RTS Index Between November 30 to December 27 the RTS tional Christmas holidays, when foreign investors Index grew by 27.89 points (12.31%) with trade leave the market. On December 26 the turnover hit volume exceeding $260 million. The trade volume the four-month minimum – $4.46 million. The daily dropped by about 30% compared to the previous average trade volume in RTS amounted to $14.month with the maximum fall of turnover (by million. At the same time a rapid rise of the RTS nearly 2.5 times over the last week) This reduction Index was noted in the first half of the month. On of trade volume can be partly explained by tradi- December 6 the index hit the annual maximum – points mln US dollars 03.01.01.02.01.03.30.03.27.04.30.05.28.06.26.07.23.08.20.09.220.127.116.11.18.104.22.168 points (+6.54% as of last day on November). The list is closed with stocks of “ LUKoil” (5.21%), Then, by mid-month the index slid by 5.18% (on “ Rostelecom” (1.21%) and “ Tatneft” (0.6%).
December 14) as investors fixed their profits. The In December the share of RAO “UES Russia” months ended up with a “pre-New Year rally”: the common stocks in the total RTS turnover was index grew by 10.89% up to a new year maximum 31.11% (in November 36.21%, correspondingly,), – 254.38 points. the share of “LUKoil” stocks was 18.09% The leaders among blue chips (on December 26) (19.75%), “YUKOS” – 14.71% (8.83%), “Surgutwere stocks of Sberbank (67.75%) and “YUKOS” neftegas” – 7.21% (8.22%), “Mosenergo” – 3.91% (19.8%), followed by “Aeroflot” (17.97%), “Mo- (3.13%). On the whole, in December the total share senergo” (13.91%) and “Surgutneftegas” (12.92%). of the top five most liquid stocks in RTS decreased to 75.03% (in November – 79.19%).
FIGURE Dynamics of the Russian Blue Chips between November 30 to December 26, 75% 65% 55% 45% 35% 25% 15% 5% -5% Change in price (%) In December, the volume with “Gazprom” cution on December 17, 2001, and on March 15, stocks traded through the RTS terminals exceeded 2002. During the first trade session participants $61.4 million (129.17 million shares). In all 3, 746 stroke 27 deals summed up with 6.7 million roubles deals were stroked with securities of the company. (667 contracts). The most attractive were futures on On December 11 the trade volume with “Gazprom” the RUIX Index with execution on December 17, stocks amounted to 546.8 million roubles (39.5 mil- 2001 - 23 deals were struck worth a total of 6.6 million shares), i.e. the maximum volume for the lion roubles (655 contracts).
whole period of existence of the trading scheme Upon the end of the trade session on December through the trade and clearing exchange complex. 17 the due contracts were safely executed (for the In December the activity of participants in the first time in the FORTS). Now, there are traded fuRTS term market (FORTS) was a bit lower than in tures with execution on March and June 2002 in the November. In total, between December 3 to De- system are.
cember 21 11,702 deals were struck in the system External factors. The oil prices slid in early(409.7 thousand contracts) worth a total of 1.945 December after Iraq resumed export under the UN billion roubles, including futures – 11,600 deals programme “Oil for food”. The oil prices were also (408.6 thousand contracts, 1.94 billion roubles). affected by a delay in Russia’s decision in response On December 3 the trades on futures on the to OPEC’s proposal on oil export reduction. On RUIX and RUIX-OIL Indexes were launched. The December 3, the price of “Brent” in London trades started with two contracts at once: with exe- dropped by $0.42 (2.19%) to 18.72 $/bbl. However t t t s a a o il i m o o E) g o ef si s kel fl s nef n ko K er egas ic b t Uk g S ro i N e en ef Tat S Ru Rus ele ur LU s t n A y S b s k ut s Mo l ter g Ro r nk of e ri a P o O UE Su N S erb ( RA Sb m MK o G azpr G in mid-December OPEC and main independent oil- 17:15 (Moscow time) the price of February’s fuproducers arrived to an agreement to limit oil ex- tures on “Brent” grew from 18.70 $/bbl up to 19.port since beginning of 2002. On December 5 the $/bbl. So, independent oil exporters (the biggest of Russian Government announced that Russia would which are Russia, Mexico and Norway) announced cut down its oil export by 150000 barrels per day reduction in oil production totalled with effective as of the 1st of January 2002. Oil prices barrels per day. However, despite the fact that the responded. vividly The price of January’s oil fu- announced reduction in export turned to be smaller tures (“Brent”) on the London International Petro- than OPEC had demanded (500000 barrels per leum Exchange (IPE) grew by $0,89 to 20.18 $/bbl day), the cartel decided on reduction in oil quotes by 13:37 (Moscow time). On the New York Mer- by 1.5 million barrels per day for half a year. This chandise Exchange (NYMEX) the January futures decision was made on a special summit in Cairo on on “American Light” gained $0.98 by that time and December 28. An additional factor stimulating the reached 20.63 $/bbl. Later, Norway also announced rise of oil price was V. Alekperov’s (President of its readiness to diminish its quote of oil export in “LUKoil”) statement that the Russian oil compathe first half of 2002 by 150000 barrels per day. Af- nies decided not to increase export of oil products ter the news from Norway, the “Brent” price on the in order to compensate for reduction in oil export.
IPE regained its fall that exceeded 30 cents. On 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 15.08.01 10.10.01 06.12.At the last meeting of the FOMC in 2001 (held stable. On November 19 Standard & Poor's raised on December 11) the US Federal Funds rate was the long-run rating of Russian (on liabilities both in cut by another 25 basic points to 1.75%. On the foreign and domestic currency equivalent) up to whole, during 2001 the Fed cut the interest rate 11 “Â+” (from “Â”) and confirmed its short-term times, from 6.5% to 1.75%. credit rating “Â”. The forecast of long-term ratings The successful performance of the Russian econ- was revised from “stable” to “positive”. S&P reomy over 2001 was noted by leading international ported that “the increase in Russia’s ratings reflects rating agencies. On November 29, Moody's up- continued improvements in political climate, which graded the Russia sovereign rating by two grades at made the Russian economy stronger, as well as once - from Â2 to Âa3 (on liabilities denominated positively influenced economic prospects and poin foreign currencies) and from B1 to B3 (in do- litical flexibility. As a result, the Russian economy mestic currency), while the forecast of all ratings dollars per barrel becomes less dependent on situation in oil markets, mates, insurance companies have lost over $2 bilwhich are not stable now”. lion. Enron’s Financial relations with other compaAnother shock for the world market was the nies were so intricate that the exact sum of debts is bankruptcy of Enron, the biggest US trader in the still unclear. The company’s balance-sheet accounts gas and electricity market. It was just recently that for about $13 billion of debts, but, independent esEnron has been the biggest player in the US energy timates suggest $40 billion. However one should market, and last year it reported $1 billion profit note that concluding an agreement between the and $100 billion revenues. The failure of the energy company and its main creditors - J.P. Morgan giant was caused by gerrymanders inside the corpo- Chase and Citigroup - on granting $15 billion to ration. As a result, several sectors of the economy back up current operations and to start the restruc(energy, banking and telecommunication sectors) turing of the company helped restrain it stock indiwere battered severely. According to some esti- ces from further downfall.
160% 150% 140% 130% 120% 110% 100% 90% 80% 70% 60% Dow Jones Industrial Average 50% Nasdaq Composite 40% The RTS Index 30% 01.02.0026.03.0019.05.0012.07.0004.09.0028.10.0021.12.0013.02.0108.04.0101.06.0125.07.0117.09.0110.11.Corporate news. Nickel” with a consequent redemption of and reGazprom. After Russia’s credit rating was duction in the MMC charter capital.
raised, the international rating agency Standard & Sibneft. “Sibneft” reported growth of oil output Poor's upgraded Gazprom rating to "B+" from "B", by 19.2% compared with the 2000. According to forecast - stable. company’s President Ye. Shvidler, the current Gazprom’s rating reflects leading status of the growth rates resulted from investments made durcompany in the Russian economy. Gazprom ac- ing previous years. In 2001 “Sibneft” invested up to counts for about 8% of the Russian GDP and about $595 million in oil extraction. In total, in 25% of budget revenues, 20% of foreign exchange “Sibneft” planned extracting of 20.5 billion tons supply. The Board of Directors of Gazprom (according to business-plan).
adopted a 161 billion roubles investment pro- Mosenergo. The net profit of Mosenergo, calcugramme for 2002. This sum was agreed with the RF lated on cash basis, in 2001 is expected to be Government. around 1.9 billion roubles compared to 1.44 billion Norilsky Nickel. Under the programme of the roubles in 2000. Revenues from sales (on cash baholding restructuring, the MMC “Norilsky Nickel”, sis) are expected to be 45.2 billion roubles comstarts abolition of “cross ownership”. The MMC pared to 33.16 billion roubles in last year.
buy out 17% of own stocks by RAO “Norilsky The Auditing Chamber of the RF noted im- million tons in October. For eleven months of provement of indicators of financial and economi- the company increased oil extraction up to 22.cal performance of “Mosenergo” in 2000 and the million tons from 21.212 million tons for correfirst half of 2001. Auditors of the Chamber report sponding period of last year.