On risks in Russia
As for political risk, Kolesnikov played down concerns saying, ''there are no forces involved in Russia that can turn it 180 degrees from where it is now.
Neither does economic risk erode his confidence.
''Inflation is under control, interest rates are going down in the government bond market, and the stock market is going up with more viability and opportunity,'' he declared.
But... see below the full text
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INTERVIEW-Speculation the rule in Russian markets
By Daniel Bases
HARRIMAN, N.Y., March 31 (Reuters) - The Russian stock market remains a speculative place for investors more used to turning a quick profit rather than functioning as an engine for economic growth, said a top Russia stock market official.
''I assess the Russian market so far as purely speculative,'' Alexander Kolesnikov, Deputy Chairman of the Russian Federal Commission for the Securities Markets told Reuters in an interview.
While attending the 21st annual Arden House conference on American-Russian Relations, hosted by Columbia and Harvard Universities, Kolesnikov lamented that money continues to be made in the markets mostly by people interested in short-term gains, not to fuel economic growth.
''I don't think right now money from financial markets moves into production yet, it is a place where people still believe, money (invested) into the market will automatically make money'' Kolesnikov said.
''While we have a taxation system that is currently operating in the way it is in Russia, this is the way things are going to operate,'' he said with resignation.
In addition to short term foreign investments made into Russia to turn a quick profit, he said the use of the markets by criminal elements to further their business interests is a growing danger.
The ''dirty money'' from illegal businesses, such as drugs and prostitution, put to work in the financial markets is being withdrawn and used to build up those criminal infrastructures, Kolesnikov warned.
Kolesnikov said that despite the governments' awareness of the dangers involved, there didn't seem to be much offered in the way of stopping the process.
''Therefore we only in theory are thinking about control of this financing right now. There are not many methods by which to fight it right now,'' he said.
Speculating, Kolesnikov said one strategy for battling this problem might be to have investors declare sources of income and cracking the tight contacts between players in the markets.
''It is all theory, more of my thoughts, rather than practical application of policy,'' he warned.
Despite the problems with oversight of capital flows, Kolesnikov did highlight some diminishing risks in his prepared statement, which he titled, ''Making Russia Safe for Investment.''
Neither political nor economic risk are seen as a major problem for investors in the Russia markets by Kolesnikov
As for political risk, Kolesnikov played down concerns saying, ''there are no forces involved in Russia that can turn it 180 degrees from where it is now.
Neither does economic risk erode his confidence.
''Inflation is under control, interest rates are going down in the government bond market, and the stock market is going up with more viability and opportunity,'' he declared.
However, even Kolesnikov points out, the stock market faces stiff competition from the debt markets.
''Investment appetites for the government bond market crave the 30 to 40 percent returns, while developing corporations return five or six percent on investor money.''
The problems created by the general downsizing of the military remain but Kolesnikov reminded the conference participants that the financial factors were being addressed with the issuance of special bonds.
''But by selling these bonds to pay for and clean up the problem of the military, don't you just create another problem with financing somewhere else?,'' asked Marshall Goldman, associate director of Harvard's Davis Center for Russian Studies.
Although he didn't answer the question directly, Kolesnikov cited as an example the bonds issued to pay for pensioners social needs, and did not appear concerned.
Another top concern for Russia's number two market regulator, is the manipulation of stock prices, and the lack of an effective system to penalize violators.
''There is no way of enforcing the law against violators,'' he admitted.
The commission has the most leverage to protect investors before a stock or secondary offering makes it to the markets.
Thirty percent of filings for stock listings are rejected, but once a company is listed, it is difficult for the Russian Federal Commission for the Securities Markets to remove it, he said.
Kolesnikov, however, was eager to point out some successes in protecting investor rights. He pointed specifically to the case of Sidanco, one of the largest Russian oil producers.
The commission, on February 17, stopped Sidanco from issuing a convertible bond to controlling shareholders which would have severely diluted the market value and power of minority investors.
Sidanco is one victory, but it helps ease the immense distrust felt by small Russian investors in the power of controlling forces over the Russian market.
"We are given the authority to press criminal charges, but
there is another problem. We don't have any intermediate steps to stop a violator and have limited powers once the shares are issued,'' he commented.
Except for a special law covering the Moscow region, ''There is no federal law that stops violators, and we think they should be prosecuted on a federal level.'' |
