ACLA-INVEST | Stock market in Russia


					Russian

   In the USSR, there were no joint stock companies, and therefore no stock market. Immovable property was distributed by the state, so people did not have to worry about mortgages. Money was usually kept in Sberbank (state savings bank) or at home, because inflation rates were low.
   In the 1990s, people found themselves in totally new life circumstances. Economically active population received freedoms, which they did not know how to use. A lot of state property was sold to commercial organizations, and lack of understanding and experience lead to funny prices paid for the biggest assets. The Communist party of the RF has many times asked for reinspection of the results of the "privatization", so as to make the organizations pay more, but the results have been officially accepted and even though the price the state got seems unfair, the transactions were legal.
   The idea to distribute the assets of the state among all its citizens by giving "vouchers" to them made every single Russian participate in the market. People received a paper, which they could sell or exchange for shares of joint stock companies. As almost no one knew what to do with this paper, it was sometimes sold for as much as a bottle of vodka, sometimes shares in financial pyramids were bought, sometimes shares of local enterprises (most of which went bankrupt very soon afterwards), and sometimes shares of today's blue chips of the Russian market were bought, bringing the lucky investors thousands of dollars. But the future blue chips did not advertise themselves as the financial pyramids did. Television and papers were flooded with advertisements of pyramids and funds, which promised collective investment schemes but later proved unprofitable. Most people lost their money, their vouchers and their faith in the financial system, strongly associating stock with mock.
   Very slowly financial institutions learned the basics of investment and started participating in the stock market. Very few individuals entered the market in 1995-1998. Both got very good profits as all the companies were underestimated and had enormous potential to grow. One of the most popular types of investment was GKO, state short-term bonds. Even though they were state bonds, the yield was sometimes 300 percent per annum, and Russian people were always ready to trust the state, never minding the many disasters. The state could not cope with these repayments for a long time and finally the system of GKOs crashed, burying under its ruins most newly opened banks, which led to a financial crisis. People could not withdraw their money from the banks, including the old and favorite Sberbank, while the dollar soared as high as six times per week. When people reached the cashiers' desks, what they had saved during their whole life was only enough to buy some food for dinner. Very many financial institutions, commercial firms and people went bankrupt.
   After this, people acquired a habit of keeping their savings at home in US dollars. There are probably more dollar banknotes in Russia than in the US. No economist knew how to get this money back into economy. Even now when it has become unprofitable, people have only tried to transfer their dollars into euro.
   With time, Russian economists got experience. Appropriate legislation was adopted. The stock exchanges quickly introduced electronic and Internet technologies as the brokers and traders were young and computer literate and there were no traditions to be rebuilt. Stock prices have already grown significantly and Russian companies are still underestimated. The market is young and attractive, but the major players on the market still are financial institutions or physical persons of finance-related professions. The government is trying to popularize stock market: mass media offer corporate news, business TV channel RBC was opened, Moscow and Saint Petersburg invite to exhibitions and seminars held by professional participants of the market but the general attitude of the population is incredulity and the level of awareness is very low. Some analysts predict that Russian market will soon be flooded by new investors disappointed with the profitability of bank deposits and of immovable property purchases which are both going down in the latest years and with investors from abroad as Russia's investment ratings grow.
    At the moment, the market can welcome a lot of new players promising rapid growth and the possibility to participate in the emerging economy of one of the richest lands on earth.


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