Page 58 - IFR Opportunities in Russian capital markets

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ifrintelligence reports/Opportunities in: Russian Capital Markets
They were surprised by the robust nature of the OTC trade, which suggests investment activity with small and medium-sized enterprises is much greater than they suspected.
The total average trading volume in all Russian equities at the start of 2007 was around US$6bn a year, with local bourses accounting for 67% of this and another 6% being on the new futures market. However, the OTC average trade volumes were US$1.6bn at the start of March, much more than analysts had expected (see Table 3.13).
This result changes the balance between the two main exchanges, as although MICEX dominates the formal trading, the RTS is the preferred venue for OTC trades. On the first day of reporting the OTC trades at the end of January 2007 the RTS saw 1,445 deals worth RUB10.15bn (US$400m) whereas MICEX had only three deals worth RUB257,648 (US$10,150).
Table 3.13: Equity trading - average daily volumes, Mar 2006, Mar 2007 (US$m,%)
Average daily, last week
RTS-Official 52
Average daily, % of total previous week
– 106 – 1,298 – 2,998 ––
Average daily, % of total last year
–51 –– – 1,227 – 200
% of total
– – – –
RTS-OTC
MICEX
Gazprom
Total domestic bourses LSE
NYSE
Total foreign bourses
1,588 2,453 –
4,093 67 4,393 68 1,478 66
1,204 – 1,197 – 485–471– 1,689 27 1,668 27
444 – 176 – 620 27
FORTS 360642871527
Total daily average 6,142 100 6,489 100 2,250 100
Note: As of first week in march
Source: RTS, MICEX, Bloomberg, Alfa Bank research
Russia as an emerging market
In the 1990s, Russian investors were a specialist breed of adventurers in a highly unpredictable market. However, over the last decade investing into Russia has moved slowly towards the mainstream and Russian companies are being included in an increasing number of international indices that in turn are bringing in more investment.
One of the effects of the steady flow of IPOs of the last two years and new equity issuance is to push the value of the total market higher, but it has also increased the availability of equities for portfolio managers around the world, as about half of the IPOs, in terms of value, have taken place on international markets.
In 2006, the share of Russian stocks in the global emerging markets (GEM) and other international funds increased sharply, from 6.3% of the GEM universe to 10.0% at the end of the year, as shown in Table 3.14. Russia’s position in the league of individual GEM countries is shown in Figure 3.5.
Table 3.14: Emerging markets funds - Russia weightings, 2006 (%)
GEM East Europe EMEA International
End Dec 05 End Jan 06 End Feb 06 End March 06 End April 06 End May 06 End June 06 End July 06 End Aug 06 End Sep 06 End Oct 06 End Nov 06 End Dec 06
6.30 38.70 6.60 40.00 6.80 40.30 7.00 40.80 7.67 41.70 8.00 43.10 8.70 44.40 8.70 44.20 9.10 45.10 8.85 45.80 9.22 44.00 9.67 45.90 9.99 44.60
12.00 0.28 16.40 0.33 16.50 0.23 17.00 0.27 18.80 0.27 18.80 0.27 24.90 0.35 27.10 0.39 27.60 0.36 30.80 0.34 30.60 0.36 31.60 0.39 31.70 0.37
Source: Emerging portfolio fund research
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