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

To: Paul Berliner who wrote (866)	12/4/1998 2:31:00 PM
From: jbe	Read Replies (1) \| Respond to of 1301

Of special interest to investors in Russian telecoms -- A Russia Today piece (with both good news & bad): Y2K: Emerging Telecom Stocks Bugged More than Others MOSCOW, Dec. 01, 1998 -- (SKATE Financial) The differences between developed and emerging markets are particularly striking when reviewing future policies and do not necessarily incorporate the effects of current reality. Whether those policies concern environmental issues, pension schemes or corporate business practices, developed economies seem to be strikingly different in their ability to anticipate and plan for the future as well as their financial abilities to support future policies. The Year 2000 millennium bug is a particularly good example of how emerging markets are dealing with identification and solutions for the problem. Emerging markets, in general, seem to be ignoring the anticipated breakdown of systems caused by the two-digit year format. In this issue of Skate Report on Capital Markets we look at whether European emerging markets are vulnerable to the Y2K problem. Say the "Year 2000" in the European emerging markets and the response you will more than likely get will be about the upcoming presidential elections in Russia rather than the millennium bug. There are a number of reasons, apart from the general preoccupation of the short-term needs of these emerging economies. The first reason, the trading infrastructure supporting local financial markets operates using more up-to-date computer programs than many in the developed markets. The software supporting the trading infrastructure in the developed markets is particularly vulnerable to Y2K simply because it was developed years before Y2K awareness. Most of the domestic financial markets, including the technologically advanced Istanbul, Budapest and Warsaw stock exchanges as well as the Russian RTS and MICEX, use technology developed in the early '90s. This technology was developed as green-field technology with a full awareness of the Y2K issue, while in developed economies most of the programming used is based on periodic enhancements of existing software thereby creating the whole cost intensive issue of "identifying Y2K risk." Prominent international technology providers such as the Australian software developer Computershare Pty and local companies like Polish Softbank and Russian Diasoft claim that their clients will not have to deal with the Y2K issue. And, that most of the technology sold in the past few years including most automated programs used by local brokerage houses, banks and online trading desks dealing with equities and domestic debt, has been designed using the four digit year format. Surprisingly, the most vulnerable area for the European emerging markets are their international debt markets cleared and settled through the established institutions Cedel and Euroclear. Both are currently exerting enormous efforts to remedy the Y2K bug. Second, the financial institutions, where most of the Y2K issues are related to tracking clients positions, loans and investment portfolios. Again most of the problems in the developed world are tied to old programming used by the financial sector. Compounding the problems are the diversity of financial services offered and the massive retail and institutional customer bases. The development of the financial service industry in the European emerging markets is much less impressive. The retail stock market is in an embryonic stage, the retail insurance market is very limited in terms of coverage and product diversity and mortgages are only starting to be offered even in the most developed economies of the region. In contrast to the developed markets, many local financial institutions just recently bought or internally developed their software, this happening after the liberalization of financial services and creation of the necessary regulatory bases in the early nineties. Generally speaking the financial industry across the region is much less vulnerable to Y2K issue than in developed economies. However, there are certain industries where Y2K is a big issue, and those are mostly sectors that are dependent on technology and equipment imported or modernization in the '80s. While Y2K risks definitely exist in some of the region's largest sectors such as engineering and utilities, the sector with the largest exposure to the millennium bug is the telecommunications industry. Even if many of the companies in the region underwent modernization such as switching to digital technology, introducing new mobile communications or Internet related businesses in the early nineties much of the equipment supplied by international manufacturers, particularly those supplying core telephone equipment, incorporates the Y2K problem. As Mr. Hassan Tavakoli, Russian Country Manager for Motorola, said in an interview with Skate Report on Capital Markets, there is almost no awareness of the problem in the region and a total lack of initiative to address the issue at both the corporate and government levels. CIS states that were particularly affected by the Russian August crash are home to most of the telecoms particularly vulnerable to the Y2K bomb. And are often lacking the adequate resources to address the problem in this environment where they are defaulting on lease payments for imported equipment and watching their customer base, particularly the very profitable mobile services, shrinking. Our advice is that when buying Russian telecom stock, make sure that the discount is enough to compensate for the highly possible Y2K risk -- it very well may not be there after the spectacular November stock rally. ( (c) 1998 SKATE Financial) russiatoday.com:80/rtoday/business/news/98120110.html !

To: Paul Berliner who wrote (866)	12/4/1998 2:42:00 PM
From: Rob Shilling	Read Replies (1) \| Respond to of 1301

The ruble is dropping, the same ol' story is printed every time it drops. At least this story wrote what is implied in every other story -- they think the ruble is worthless and has no value (ruble between 6 and 1000 quote). It is not surprising the ruble is dropping. Brent oil is down 4 buck from 14 in 2 months, there was $3 billion in foreign debt paid or to be paid this quarter. What is not mentioned is that Russian oil companies get more profitable as the ruble falls, and that the "terrible Russian economy" has a "whopping deficit" of under 3% right now. Gee, Brazil has a deficit of 9% and they just got gobs of money from the IMF. I am waiting for the oil price. When Brent was at $14 the central bank reserves were increasing $500 million a week.