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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Haegin who wrote (276)	7/7/1998 9:59:00 AM
From: doormouse	Read Replies (1) \| Respond to of 1301

This is deeply political as well as financial. The Bank of Moscow is a Moscow Mayor Luzhkov operation--same bunch that bought out large portions of Lexington-Troika Russian Mutual Fund. The fundamentals on Tokobank appeared bad, but Moscow Bank was going to take it over until Friday. Their last minute backout may be brinksmanship on the part of Luzhkov. The best number I have seen indicates a 2% survival rate (maybe 30 of 150,000 Russian banks) would survive a serious devaluation of the ruble. A very serious Russian economist who is well connected and usually cuts his words carefully now says that a realistic valuation for the ruble is 9 to one dollar (it is currently trading in a limited ruble corridor at 6.24 to the dollar) and that since much of the population lives off barter, dacha gardens, and non-paid wages any devaluation would not hurt the "silent majority". The underlying assumption is that the worst damage--wiping out people's life savings (while guranteeing the old communist elite a cushy life and riches or at least potential richs which they could quickly ship abroad) was done by the 1992 Gaidar-Harvard economic shock therapy and that nothing can hurt or ignite the population,---at least the urban population in the five largest cities. Revenge of the Gorbachities may be at work, but the pullback by the ERDB suggests, at least a recognition that financial fundementals are so flawed at Tokobank that they are beyond salvation or worse that banking dominoes are starting to fall, big time, across Russia. Public reaction will be important: when millions of people, mostly pensioners lost large sums on the collapse of the clever MMM pyramid scheme, the Duma eventually with Yeltsin, appropriated many millions in compensation---it all disappeared down some Orwellian sink hole called post-communist corruption. Russians are scrambling...duck and cover....the silent majority is untouched and uncaring about the stock market, but maybe slightly less so about the banks and currency. jes

To: Thomas Haegin who wrote (276)	7/8/1998 2:16:00 AM
From: baystock	Respond to of 1301

<<In all, foreign banks have more than $72 billion of outstanding loans to the country, with nearly half of that controlled by such German banks as Deutsche Bank AG, Dresdner Bank AG and Commerzbank AG, as well as the state-owned banks, or landesbanks. About 60% of this capital is in the hands of the Russian bank sector, making any signs of weakening particularly worrisome. >> I really don't understand how some people are so confident that the ruble won't be devalued. So what if Russia doesn't have a current account deficit. $72 billion in loans from foreign banks is more than enough to trigger a currency collapse if the plug is pulled. Ram