- As far as I understand, the current state of the Russian stock market looks pretty good. The RTS Index, for example, is over 600 and holding on confidently.
- I would say, yes. There is another indicator that gives us reason to be quite confident in the situation on the market and that’s market capitalization, which amounts to $217 billion as of today. That is to say, that’s a very big figure, 45% of our GDP, comparable to the stock market index in Germany and in France, and this, of course, is very pleasing.
- These comparisons are based on percentages, but as far as dollar amounts are concerned, they operate in the trillions and Russia’s stock market is small, in fact.
- That’s not true, because our stock market is already ranked, to my knowledge, 17^th or 18^th now, meaning it’s very large. We have left behind many European countries. Of course, they are smaller but if you remember, three years ago, the President told us to at least outstrip Finland, and we caught up with it and overtook it quite some time ago. Our stock market is larger than the stock market of all the Central European countries combined, and we are no longer talking about tiny trading volumes. Our stock market is very liquid and mature. We have other kinds of problems. We are still limited to the blue chips. The thing is that our blue chips have probably reached their actual price and are selling at their true value. But we have a host of second- and third-tier companies, which have simply not been valued at all and, as a result, they are very cheap. But I think that this year is the year our market will develop substantially in terms of market entrance by second- and third-tier companies. This trend already apparent; the market is trying to move in this direction. We see investors attempting to go beyond the blue chips, and we hope that 2004 will be the year when the market will develop some depth. As a foundation for this process, we have adopted regulatory documents concerning changes in disclosure procedures. They will come into effect in full in April when investors will be able to obtain virtually the same information on Russian public joint companies as investors can about Western companies.
- As I see it, the market’s problem may be that companies themselves don’t want to become transparent when they make their market entrance.
- I think you are right, in part. But the logic of economic development demonstrates that without attracting financial resources or without raising capital, a company is simply losing market share and therefore losing profits. This is economic common sense. The problem does exist, and it is linked with the market situation and the risks medium-size companies face. They are still afraid that if they became transparent, investors will come and take their property. Of course, the Commission must play a role here: we must complete amendments to market legislation that would ensure reliable protection of the company register when problems arise from time to time. In general, insider information, protection of customer assets and registrars are the most urgent problems we need to address.
There is no doubt that the political stability of the last few years is one of the key factors fueling index growth and the rise in value of Russian companies; this progress couldn’t have been without it. Of course, political stability is a vital factor. Economic growth and government policy are other important factors – they also have an impact. And then, we come to companies per se. Each company should demonstrate what it is capable of. If a lot of companies show positive results, the market will also expand. I’m looking at the future with optimism. I believe that if we manage to proceed with reforms on the market and in the national economy, the general trend of the market will be positive.
- We have mentioned that S&P, one of the most influential international rating agencies, upgraded our sovereign rating, to a certain extent. This has had a short-term impact but perhaps it will have long-term consequences as well. The short-term consequences seem to be an upturn on the stock market. However, I had a look at the RTS Index today and it was going down. First of all, why? And secondly, does this change in the rating mean that before long, more Western investors, whom we see as almost saviors, will come and invest their money in Russia?
- There are two points here. I’d rather start from the end and say that as far as Western investors are concerned, we already have enough Russian investors making investments in the Russian market; they are creating the high liquidity, and the market is growing now, probably, in the first place, due to domestic investors stabilizing the market. There is no doubt that there are funds coming from Western investors, and this is clear because over the last three years the Russian market has been one of the best markets in the world in terms of growth and the changes taking place on it. Last year, we were rated among top four markets: China, Turkey, Brazil, and Russia, I think, are four markets that are developing most efficiently. In other words, it is evident that Western investors will also take note. Now, as for ratings, there is no doubt that they have an impact on the situation not only on the federal securities market but also on the corporate market. But I’d like to say that Moody’s investment rating in October has largely determined this situation, meaning that subsequent changes in investment ratings will follow. I think that this is why the market can expect an investment-level rating to be assigned by S&P. It’s the next level and when it is reached, the index will respond.