#5 - JRL 7304
Booming Moscow stock market overtakes most emerging
markets
August 27, 2003
AFP
The booming Moscow stock market's capitalisation has shot up by 50 percent in the past six months to reach 168 billion dollars, more than most emerging markets and those in some Western countries, a top official said Wednesday.
The combined value of shares on the Moscow stock market, which totalled 110 billion dollars (101 billion euros) on January 31, has now overtaken the value of the Finnish stock market, which stands at 140 billion dollars, Igor Kostikov, Chairman of the Federal Securities Commission, said in an interview posted on the body's website.
"We are advancing rapidly," he said, adding that the market capitalisation of the Moscow stock exchange was now equivalent to nearly 45 percent of the Russian gross domestic product (GDP) forecast in the 2003 budget.
The market value "has overtaken that of the majority of emerging markets and several Western countries," the official added.
For the second year running, "we have observed that Russian investors are more active and represent a growing part of the market," Kostikov said.
The share of Russian groups from the raw materials sector -- principally oil and gas producers -- in the makeup of the stock market capitalisation has fallen significantly, from 90 percent three years ago and 75 percent last year to 68 percent today, Kostikov noted.
However, the Russian stock market is plagued by a lack of liquidity, which reinforces the speculative nature of trading, commented Sergei Kazakov, chief analyst at Nikoil investment bank.
The Russian state controls a majority of the giant gas and electricity monopolies, Gazprom and UES, and the Sberbank savings bank.
In the case of oil firms Yukos, Sibneft or Surgutneftegaz, the managers control most of the capital, while telecoms operator Rostelekom and energy group Mosenergo are held by mixed holdings.
The stock market also plays a minor role in the economy compared to Finland or Germany, said Jeffrey Dennis, an emerging markets specialist from finance house Smith Barney.
There are only two new share flotations a year in Russia, compared to 121 in Japan despite its stagnating economy, pointed out Mikhail Overchenko, a financial journalist on the Vedomosti business daily.
However, progress has been made in recent years, with the introduction of better management practices and a greater respect for the rights of minority shareholders, said the Smith Barney analyst.
"The discount which affects the Russian market" because of its risky nature "is on the decline," Dennis added.
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