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Russia: Sitting out the Russian winter

Russian banks and brokers face a bleak winter. Equity business generated from buying and selling privatization vouchers has dried up, and Russian companies - in urgent need of capital - will not be ready to access the international capital markets for another two to three years. Peter Lee looks at brokers' efforts to bolster the value of Russian company shares and to keep the foreign investors biting.

During the last few weeks of 1995, equity traders in Moscow all but gave up on the slumping Russian stock market. Turnover volumes fell to a meagre $40 million a week, down from $100 million a day at the peak of stock market activity last June. Instead of quoting share prices, bored traders offered spreads on the share of the popular vote the Communist party might win in the country's parliamentary elections on December 17. Early in November, the pessimistic Russian and foreign bankers were quoting 33% to 35% for the Communists. By early December, the mood was better, as expectations for Communist successes fell to between 17% and 19%.

But hopes that the recent government reform policies would survive the elections failed to boost the stock market back to the high levels seen during August and September 1994 and the summer of 1995, when speculative foreign buyers rushed into stocks. Even the best-known Russian companies suffered dramatic declines in their share prices during the second half of last year.

LUKoil shares traded as high as $7.50 during the summer but fell to $3.80 by late November. Norilsk Nickel fell from $14 to $3.85, shares in vehicle company Kamaz fell from $6 to $3, Rostelekom fell from $7.45

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