Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Real Man who wrote (332)	7/15/1998 1:22:00 PM
From: djane	Read Replies (3) \| Respond to of 1301

Moscow Times. Markets Leap Up After IMF Loan moscowtimes.ru By Jeanne Whalen Staff Writer Russian financial markets soared to four-week highs Tuesday as investors returned in force, emboldened by a multibillion-dollar foreign aid package that promises to stabilize the ruble and prevent financial collapse. The Moscow Times Index of 50 leading shares shot up 16.7 percent to 135.4 on three times the trading volume seen in recent months. Russia's main share market, the Russian Trading System, actually suspended trading late in the afternoon when the market grew beyond allowed levels for a single day. The MT Index hasn't grown so much in one day since late October, just before the Asian financial crisis and sinking world oil prices began to chase investors away from Russia. Russian shares had fallen 77 percent since August on the heels of exiting investors. "Western buyers were dominating today -- I think they decided Russia is a bargain and they're trying to catch the train," said Valery Levit, a stock trader at brokerage Rinaco Plus. The International Monetary Fund and other lenders rescued Russia from financial collapse Monday by offering $17.1 billion in emergency loans. Primarily aimed at padding the Central Bank's hard currency reserves to avoid a ruble devaluation, the promised loans appeared to hit their mark Tuesday as the ruble strengthened .05 percent to close at 6.19 to the U.S. dollar. Equally encouraging was the astonishing drop in yields on domestic treasury bills, or GKOs, which determine the cost of the government's borrowing. Yields on most notes were cut in half from over 110 percent to under 60 percent as investors snapped up the bills, confident in the ruble's stability and in Russia's ability to repay its debt. Russia's announcement Monday that it plans to end short-term borrowing through GKOs made the bills seem more valuable to investors, as there will be fewer of them in circulation in the future, said Alexei Zabotkine, fixed income analyst with United Financial Group. Amid the general glee analysts paused to recognize that Russia's rebound will be temporary unless the government succeeds in implementing critical financial reforms. "The financial package does not solve our problems -- it solves our immediate problems and allows the government to take the additional steps to institute reforms," said Petru Vaduva, head of equity research at MFK Renaissance. "I think we have a month or two." Much is riding on the Kremlin's ability to push emergency economic legislation through parliament this week. The IMF has implied that passage of the measures is critical to disbursement of the emergency funds, $5.6 billion of which could be delivered next week after final IMF approval. Passage of the bills and visible progress in collecting taxes and cutting spending will also be critical to sustain investor confidence in Russia's long-term health. "If the package goes through the Duma and if the government continues to be determined to collect taxes, it eventually will show up in the fiscal numbers and in the budget deficit," Vaduva said. "If that happens you will see a sustained rally." Cutting high interest rates, especially on domestic treasury bills, is one of the most important steps Russia must take to cut its deficit. The Ministry of Finance Tuesday revealed details of its plan to tame the nation's unwieldy debt burden. Russia plans to convert at least $2 billion worth of treasury bills into seven to 20-year dollar-denominated Eurobonds in a bid to spread looming debt payments over a longer period of time, ministry officials told investor conferences in Moscow and London. Eurobonds offer a more advantageous form of borrowing because they are longer-term and carry lower interest rates, as they are denominated in relatively safe hard currency. Investors holding treasury bills maturing before July 1, 1999 will be allowed to swap them for lower-interest Eurobonds through Friday. Interest rates will be determined through special negotiations with investors but are expected to approximate rates on existing Eurobonds of roughly 15 percent. The minimum $2 billion the government expects to convert won't offer huge relief, as it represents only 5 percent of Russia's outstanding treasury bill debt of 256 billion rubles ($41.3 billion). "If investors find the exchange acceptable, we shall be able to improve the situation on the T-bill market," Reuters quoted Deputy Finance Minister Oleg Vyugin as saying at the investor presentation. But now that the ruble appears steady, bankers were skeptical that many investors would want to take advantage of the conversion offer. "After the package announced yesterday Russia is in a no-default scenario, so why should you give up the relatively high yields you have on your GKOs unless you want to lock into something longer?" asked the head of fixed income at one Western investment bank. "We are not really pushing our customers to do this." Some foreign investors fearing a ruble devaluation might be convinced to convert, but domestic banks, which hold about two-thirds of outstanding GKO debt, won't likely participate, analysts said. To cut down on some of its treasury bill debt Russia has cancelled this week's paper auction, choosing to redeem about $1.5 billion in maturing issues out of its reserves instead of rolling over the debt. The foreign loan package gives Russia the reserves to adopt this strategy, analysts said. \| Homepage \| Today's Issue \| Next Article \| \| Home \| Today's Issue \| Business Journal \| Stock Market \| MT Out \| \| Archive \| Job Opportunities \| Classifieds \| \| Subscribe \| Advertiser Index \| The Moscow Times \| \| Independent Media \| The St.Petersburg Times \| Skate \| c copyright The Moscow Times 1998