**RUSSIAN ECONOMIC AND FINANCIALDEVELOPMENTS**

**FOR WEEK ENDING NOVEMBER 19, 1999**

 

26 NOV 99

SOURCE: U.S. EMBASSY MOSCOW

---------------------------

FINANCIAL MARKET INDICATORS

---------------------------

 

1. FINANCIAL MARKET TRENDS

 

SPECULATION THAT THE LONG-DELAYED,LONG-EXPECTED IMF

TRANCHE WOULD SOON BE RELEASED, AS WELL ASEXPECTATIONS

OF A LONDON CLUB DEBT RESTRUCTURING DEAL,CONTRIBUTED

TO A GENERALLY POSITIVE FINANCIAL WEEK INRUSSIA. THE

RTS INDEX WAS UP AGAIN THIS WEEK, BY 6.8PERCENT IN

REAL TERMS WITH HIGHER THAN NORMAL VOLUMES,PROPELLED

MAINLY BY NON-RESIDENT BUYING.

INTERNATIONAL RESERVES DROPPED BY 1.7PERCENT, OR USD

200 MILLION, TO USD11.5 BILLION.  THEMONETARY BASE

SHRANK THIS WEEK BY 0.11 PERCENT OR R0.3BILLION.

 

---------------------------------------------

2. ECONOMIC AND FINANCIAL MARKETDEVELOPMENTS

---------------------------------------------

 

-- ACCORDING TO THE RUSSIAN STATISTICALAGENCY,

INDUSTRIAL PRODUCTION GREW BY 7.5 PERCENTDURING THE

FIRST TEN MONTHS OF 1999 AND TOTALED R2,325BILLION.

IN OCTOBER, INDUSTRIAL PRODUCTION GREW BY10.3 PERCENT

COMPARED TO OCTOBER OF 1998.  THEHIGHEST GROWTH WAS IN

MICROBIOLOGICAL INDUSTRY (34.7 PERCENT) ANDCHEMICAL

AND OIL-CHEMICAL INDUSTRIES (21PERCENT).  THE GROWTH

OF INDUSTRIAL PRODUCTION DURING THE FIRST 10MONTHS OF

THE YEAR WAS REGISTERED IN ALL 15 INDUSTRIESTRACKED BY

THE RUSSIAN STATISTICAL AGENCY.

 

--  THE STATE DUMA PASSED IN THIRDREADING THE FEDERAL

LAW "ON THE INCREASE IN THE MINIMAL WAGELEVEL" WHICH

WOULD INCREASE THE MINIMUM WAGE TO R200STARTING

JANUARY 1, 2000.  CURRENTLY, THEMINIMAL WAGE IS

R83.49, ABOUT USD3.16.  THE LAW NOWGOES TO THE

FEDERATION COUNCIL, AND THEN TO THEPRESIDENT.

 

-- TOTAL WAGE ARREARS DECREASED BY 2.8PERCENT IN

OCTOBER AND TOTALED R53.1 BILLION.

 

-- THE RUSSIAN TAX MINISTRY SAYS THATABOLISHING THE

PRACTICE OF "TOLLING" WOULD RESULT IN AREVENUE

INCREASE OF APPROXIMATELY USD400MILLION.

 

--  MICEX ANNOUNCED IT WILL STARTSECONDARY TRADING IN

LUKOIL AND TNK BONDS ON NOVEMBER 22,1999.

 

-- THE RUSSIAN STATISTICAL AGENCY REPORTSTHAT THE

NUMBER OF OFFICIALLY REGISTERED UNEMPLOYEDPEOPLE

DECREASED BY 4.2 PERCENT IN OCTOBER ANDTOTALED 1.283

MILLION.  HOWEVER, WHEN CALCULATEDACCORDING TO THE ILO

METHOD, THE TOTAL NUMBER OF UNEMPLOYEDJUMPED TO 8.65

MILLION.  THERE WERE 73.8 MILLIONECONOMICALLY ACTIVE

PEOPLE IN RUSSIA AT THE END OF THEOCTOBER,

APPROXIMATELY 50 PERCENT OF THE TOTALPOPULATION OF

RUSSIA.     .

 

-- THE RUSSIAN STATISTICAL AGENCY ALSOREPORTED THAT

THE MINIMUM SUBSISTENCE LEVEL GREW DURINGOCTOBER BY 7

RUBLES, UP TO R927, APPROXIMATELYUSD35.11.  THE

AVERAGE INCOME PER CAPITA  WAS R1646(APPROXIMATELY

USD62.35), WHICH IS 5.6 PERCENT HIGHER THANIN

SEPTEMBER AND 48.7 PERCENT HIGHER IN RUBLETERMS

COMPARED TO THE OCTOBER OF 1998.

 

-- THE AVERAGE NOMINAL WAGE INCREASED BY 33RUBLES IN

OCTOBER AND TOTALED R1717 WHICH IS 26PERCENT HIGHER

THAN IN SEPTEMBER AND 54.5 PERCENT HIGHERTHAN IN

OCTOBER 1998 IN NOMINAL RUBLE TERMS. REAL WAGES

INCREASED BY 0.6 PERCENT COMPARED TOSEPTEMBER, BUT

WERE 1.7 PERCENT LOWER ON A Y-O-Y BASIS.

-- ACCORDING TO THE RUSSIAN TRADE MINISTRY,RUSSIA IS

NOW THE WORLD'S LARGEST STEEL EXPORTER,PRODUCING 10

PERCENT OF ALL WORLD STEEL EXPORTS.

 

--

 THE ORGANIZATION OF THE ECONOMICCOOPERATION AND

DEVELOPMENT (OECD) ISSUED A REPORT ONRUSSIA,

PROJECTING GDP GROWTH OF TWO PERCENT THISYEAR AND

ANOTHER 1 PERCENT PER YEAR IN 2000-2001.

 

--------------

3.  BANK ALERT

--------------

 

-- THE MOSCOW ARBITRATION COURT DECLAREDPROMSTROYBANK

INSOLVENT, DESPITE THE FACT THAT CREDITORSHAD AGREED

TO RESTRUCTURE THE BANK'S ARREARS.

 

-- THE AGENCY FOR RESTRUCTURING CREDITORGANIZATIONS

(ARCO) DECLARED A MORATORIUM ON ALL PAYMENTSTO

CREDITORS BY SBS-AGRO BANK, EFFECTIVENOVEMBER 16, 1999.

IN 30 DAYS. ARCO WILL PRESENT ITS PLAN OFAGREEMENT

WITH CREDITORS.  CURRENTLY, ARCO OWNS99 PERCENT OF THE

BANK.

 

--  ARCO HAS SENT OUT ITS PROPOSEDAGREEMENT TO THE

CREDITORS OF THE ROSSIYSKIY CREDIT BANK ANDCREDITORS

HAVE 45 DAYS TO DECIDED WHETHER TO ACCEPT ORREJECT

ARCO'S PROPOSED CONDITIONS.

 

--  THE CENTRAL BANK HAS PROPOSED THATARCO ALSO

CONSIDER RESTRUCTURINGTVERUNIVERSALBANK.

 

--  THE RUSSIAN SAVINGS BANK (SBERBANK)REPORTED

PROFITS OF OVER R9 BILLION (USD340 MILLION)AS OF THE

BEGINNING OF OCTOBER.

 

-- THE CBR SAYS IT WILL PROPOSE SOMEAMENDMENTS TO THE

LAW "ON INSOLVENCY OF CREDITINSTITUTIONS".  IT PLANS

TO RESTRICT REGISTRATION AND LICENSING OFCREDIT

INSTITUTIONS AND TO MAKE THEM MORETRANSPARENT.

 

-- DURING THE LAST WEEK, THE CBR REVOKEDLICENSES OF

EIGHT MORE RUSSIAN BANKS.  ON FRIDAY,IT REVOKED THE

LICENSE OF DIALOGBANK.

 

--  THOMSON BANKWATCH GAVE AVANGARDBANK A CCC CREDIT

RATING, THE HIGHEST RANKING FOR A RUSSIANBANK'S LONG-

TERM CREDIT.

 

---------

4. PRICES

---------

 

ACCORDING TO THE RUSSIAN STATISTICAL AGENCY,INFLATION

FOR THE FIRST 9 DAYS OF NOVEMBER TOTALED 0.3PERCENT.

THE AVERAGE DAILY INFLATION DECREASED THISMONTH TO

0.029 PERCENT, COMPARED WITH 0.044 INOCTOBER, WHEN

INFLATION TOTALED 1.4 PERCENT.

 

------------------------------

5.    FINANCIAL MARKETTABLES

------------------------------

 

-----------------------------------------------------------

A. RUBLE DOWN

-----------------------------------------------------------

 

THE RUBLE WEAKENED THROUGHOUT THE WEEK, INSPITE OF THE

SUPPORT OF THE CBR AND RELATIVELY HIGHSUPPLY OF HARD

CURRENCY FROM EXPORTERS.  PART OF THEPRESSURE ON THE

RUBLE CAME BECAUSE RATES ON THE INTERBANKRUBLE OVERNIGHT

MARKET WERE LOW, WHICH CAUSED MONEY TO FLOWINTO THE

CURRENCY MARKET.  ACCORDING TO MARKETPARTICIPANTS, THE

CBR HAD TO SELL USD100 MILLION TO SUPPORTTHE RUBLE ON

WEDNESDAY.  BY THE END OF THE WEEK, THESPECULATIVE MOOD

LEFT THE MARKET AND THE RUBLE EVENSTRENGTHENED SLIGHTLY

ON THE UNIFIED SESSION ON FRIDAY. HOWEVER, ANY FURTHER

STRENGTHENING OF THE RUBLE IS RESTRICTED BYTHE HIGH

RUBLE LIQUIDITY IN THE BANKING SECTOR.

                                                   .

 

TABLE 1A:  RUBLE RATES -- MICEX SELTTRADING (NOTE 1)

 

 ------------------------------------------------

           USD-TOD   USD-TOD   USD-TOM  USD-TOM

   DATE   AVERAGE   VOLUME   AVERAGE  VOLUME

            PRICE   (USD MN)   PRICE   (USDMN)

 ------------------------------------------------

 11/15/99  26.2431  227.52   26.2530    57.1

 11/16/99  26.2444  152.70   26.2986    48.5

 11/17/99  26.3244  238.51   26.4140    71.0

 11/18/99  26.4148  213.70   26.4238    59.9

 11/19/99  26.3879  181.11   26.4456    52.2

 

TABLE 1B:  RUBLE RATES -- CASH RATES ATEXCHANGE POINTS

(RUBLES PER USD) (NOTE 2)

-------------------------------------------------

                   PRCTCHNG          PRCT CHNG

   DATE    AVERAGE   AGAINST   AVERAGE  AGAINST

            BUY    WEEK AGO   SELL    WEEK AGO

-------------------------------------------------

 11/15/99  26.21         N/A 26.40         N/A

 11/16/99  26.21        0.38 26.44        0.49

 11/17/99  26.26        0.69 26.53        0.80

 11/18/99  26.31        0.77  26.57        0.91

 11/19/99  26.31        0.34 26.55        0.23

 

TABLE 1C:  RUBLE RATES-- CBR OFFICIALEXCHANGE RATE

 ---------------------

--------------------

                    PRCT CHNG  PRCT CHNG

   DATE   OFFICIAL   AGAINST    AGAINST

            RATE     WEEK AGO   09/08/98

 -----------------------------------------

 11/15/99 26.3100        N/A        N/A

 11/16/99 26.2400       0.04      54.44

 11/17/99 26.2400       0.19      54.44

 11/18/99 26.3200       0.80      54.91

 11/19/99 26.4100       1.15      55.44

 

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B. OFZ MARKET

---------------------

 

PRICES ON THE SECONDARY OFZ MARKET GREWTHROUGHOUT THE

WEEK FOR ALL ISSUES.  IN THE EARLY PARTOF THE WEEK,

THE YIELD ON THE SHORTEST OFZ ISSUE WAS DOWNTO 66.3

PERCENT, WHILE YIELDS ON LONGER-TERM ISSUESTOTALED 93-

94 PERCENT P.A., COMPARED TO 100 PERCENTP.A. ONE WEEK

BEFORE.  ON THURSDAY, THERE WERE SOMEINITIAL SMALL

DOWNWARD PRICE CORRECTIONS, BUT THEN THEMARKET SOARED

AGAIN FOLLOWING POSITIVE COMMENTS BY FINANCEMINISTER

 MIKHAIL KASIANOV CONCERNING THE LONDONCLUB AND IMF

 NEGOTIATIONS.  ON FRIDAY, THEYIELD ON OFZ ISSUE NUMBER

 022 DROPPED TO 55.8 PERCENT P.A. ANDLONGER-TERM PAPER

 YIELDS FINISHED LOWER THAN 90 PERCENTP.A.

 

 ----------------------------------------------------

C. SHORT-TERM INTERBANK DOWN AGAIN

-----------------------------------------------------

 

SHORT-INTERBANK RUBLE LOAN RATES STARTEDHIGH ON MONDAY

BUT DECLINED THROUGHOUT THE WEEK, REACHINGMINIMUM OF 5

PERCENT P.A. ON FRIDAY.  GENERALLY, RATES WERE RATHER

LOW DURING THE WEEK.  THE BALANCES ONBANKS'

CORRESPONDENT ACCOUNTS IN THE CBR STAYED ATQUITE HIGH

LEVELS THIS WEEK, AND ON FRIDAY EXCEEDED R57BILLION

RUBLES, THE MAXIMUM FOR THE WEEK.  THECOMBINATION OF

LOWER SHORT TERM RATES AND HIGHCORRESPONDENT ACCOUNT

BALANCES PUT PRESSURE ON THE RUBLE, AS BANKSAND

INVESTORS MOVED MONEY INTO FOREIGNCURRENCY.

 

 --------------------------

 TABLE 4: INTERBANK CREDIT

 --------------------------

 

 DATE                     PERIOD (IN DAYS)

 -----------------------------------------------------

                   1     7    14     30    60     90

 -----------------------------------------------------

 

 NOV 15   MIBID  09.4   09.0   13.0  20.0   25.0  25.0

         MIBOR   16.4   19.0  23.0   32.0   40.0  40.0

 

 NOV 16   MIBID  07.4   08.0   12.0  19.0   25.0  24.0

         MIBOR   14.4   18.0  20.0   28.0   40.0  39.0

 

 NOV 17   MIBID  08.2   13.0   18.0  19.0   20.0  22.0

         MIBOR   14.0   25.0  31.0   32.0   36.0  39.0

 

 NOV 18   MIBID  06.6   08.0   10.0  18.0   25.0  25.0

         MIBOR   12.6   18.0  20.0   28.0   35.0  35.0

                                              .

 NOV 19   MIBID  05.0   07.0   12.0  18.0   25.0  24.0

         MIBOR   10.3   17.0  22.0   28.0   40.0  39.0

 

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D. STOCK MARKET RALLIES AGAIN

------------------------------------------------------------

THE STOCK MARKET WAS UP AGAIN, AFFECTEDMOSTLY BY THE

POSITIVE ATMOSPHERE ON THE US MARKET,SOARING WORLD OIL

PRICES, AND FOREIGN STOCK PURCHASES. AT THEBEGINNING OF

THE WEEK, STOCK PRICES WERE PUSHED UP MAINLYBY

PURCHASES ORIGINATING LONDON. THE MARKET HASBEGUN TO

BROADEN, WITH SOME INTEREST HAS BEEN NOTICEDIN THE LESS

LIQUID PARTS OF THE BLUE CHIP SECTOR. LATER IN THE

WEEK, DOWNWARD PRICE CORRECTIONS TOOK PLACEAS MARKET

PLAYERS DECIDED TO TAKE PROFITS.  BUTON FRIDAY, THE

MARKET BEGAN TO GROW AGAIN, PUSHED UP BYNON-RESIDENT

BUYING AND THE CLOSING OF SHORT POSITIONSHELD BY

RUSSIAN BROKERS.  FOR THE WEEK, THE RTSINDEX GAINED 6

PERCENT IN REAL TERMS.

 

--------------------------

TABLE 5: RTS STOCK INDICES

--------------------------

                                              DOLLAR

 DATE    RTSINDEX        PERCENTCHANGE      ADJUSTED

          (R)       NOMINAL (RUB) REAL(USD)

 

 NOV 15 667.80         1.92       1.17     112.87

 NOV 16 680.45         1.89       2.17     115.32

 NOV 17 684.95         0.66       0.66     116.08

 NOV 18 674.13        -1.58      -1.88     113.90

 NOV 19 702.31         4.18       3.83     118.26

 

 -------------------------

 E. INTERNATIONAL RESERVES

 -------------------------

 

 INTERNATIONAL RESERVES OF THE CENTRALBANK AND THE

 FINANCE MINISTRY DROPPED DOWN BYUSD200 MILLION OR 1.74

 PERCENT AND TOTALED USD11.5BILLION.  AS OF NOVEMBER

 12, THE CBR'S REPORTED INTERNATIONALRESERVES NO LONGER

 INCLUDE RESOURCES HELD AT THE CBR'SFOREIGN

 SUBSIDIARIES.

 -----------------------------------------

 TABLE 6: INTERNATIONAL RESERVES (NOTE5)

 -----------------------------------------

 

 INTERNATIONAL  BLN USD PERCENT CHG  PERCENT CHG

 RESERVES                 PREV WK      01.01.99

 

 11.12.99        11.5     -1.7        -05.7

 11.05.99        11.7     -0.9        -04.1

 10.29.99        11.8      0.9        -03.5

 10.22.99        11.7      0.0        -04.1

 10.15.99        11.7      0.9        -04.1

----------------

F. MONETARY BASE

----------------

 

THE MONETARY BASE DECREASED SLIGHTLY THISWEEK BY 0.11

PERCENT OR R0.3 BILLION AND TOTALED R277BILLION.

 

--------------------------------

TABLE 7: MONETARY BASE (NOTE 6)

--------------------------------

 

MONETARY   BLNRUBLES    PRCT CHNG FROM      PRCT CHNG FROM

BASE                       PREV. WEEK        PREV. 4 WKAVG

 

11.15.99    277.0          -0.11                 1.9

11.09.99    277.3           3.05                 2.8

11.01.99    266.8          -1.59                -0.1

10.23.99    271.1          -0.33                 2.4

10.1.99      272.0            2.06                 3.5

 

--------------------------

G. CORRESPONDENT ACCOUNTS

--------------------------

 

------------------------------------------

TABLE 9: BALANCES ON CORRESPONDENTACCOUNTS

------------------------------------------

 

       DATE               BALANCE (BLN RUB)

     11.15.99                   54.271

     11.16.99                    5.072

     11.17.99                    54.240

     11.18.99                    53.951

     1.19.99                    57.086

 

----------------------

H. RESERVE REQUIREMENTS

----------------------

 

BANK RESERVES REQUIREMENTS REMAIN UNCHANGEDSINCE JUNE 10, 1999

 

------------------

EXPLANATORY NOTES

------------------

 

1. EXCHANGE RATES: SELT - "SYSTEM OFELECTRONIC LOT

(CURRENCY) TRADING" - A COMPUTER-BASEDOTC-TYPE TRADING

SYSTEM ORGANIZED BY THE MOSCOW INTERBANKCURRENCY

EXCHANGE (MICEX).  USD-TOD PRICE IS THEPRICE OF THE

DOLLAR WITH THE SAME DAY DELIVERY. USD-TOM PRICE IS

THE PRICE OF THE DOLLAR WITH DELIVERY ON THENEXT DAY.

MINIMUM LOT SIZE FOR EACH OF THE DOLLARINSTRUMENTS IS

USD100,000.  AVERAGE PRICE IS QUOTED ASTHE WEIGHTED

AVERAGE OF ALL THE BIDS AND OFFERS ENTEREDINTO THE

SYSTEM BY VARIOUS BANKS.

 

2. AVERAGE CASH RATES ARE QUOTED ASCALCULATED BY THE

INTER-LINE INFORMATION AGENCY THAT PROCESSESDATA FROM

OVER 500 EXCHANGE POINTS IN THE CITY OFMOSCOW.

 

3. INTEREST RATES: THE TABLE PROVIDES MOSCOWINTERBANK

BID (MIBID) AND MOSCOW INTERBANK OFFEREDRATE (MIBOR)

B ANNUALIZED AVERAGE BID AND OFFER RATES ONSHORT-TERM

RUBLE LOANS BETWEEN COMMERCIAL BANKS.

 

4. STOCK INDICES: THE RTS INDEX, IS THE ONLYOFFICIAL

INDICATOR OF THE RUSSIAN TRADINGSYSTEM.  IT IS

CALCULATED EVERY 30 MINUTES OF THE RTS TRADESESSION,

STARTING FROM 12:00.  IT COMPRISES 60SHARES OF 35

LEADING COMPANIES.  THIS SHARES AREINCLUDED IN SO-

CALLED CATEGORY "A" LISTING.  THE INDEXINDICATES OVER-

THE-COUNTER STOCK PRICES.  THE INDEXREPRESENTS THE

RATIO OF THE TOTAL MARKET CAPITALIZATION OFTHE SHARES

OF THE COMPANIES SELECTED FOR THE INDEX TOTHE TOTAL

MARKET CAPITALIZATION OF THE SAME SHARES ASOF THE

INITIAL DATE MULTIPLIED BY THE INDEX VALUEAS OF THE

INITIAL DATE (31 DECEMBER, 1997) USING ABASE OF 100

BEGINNING SEPTEMBER 1, 1995.  THERUBLE-ADJUSTED INDEX

IS A DERIVATIVE OF THE MAIN DOLLAR INDEX,USING THE

SAME BASE.

 

5. INTERNATIONAL RESERVES OF THE RUSSIANFEDERATION

REPRESENT THE AMOUNT OF RESERVE ASSETS OFTHE BANK OF

RUSSIA AND FINANCE MINISTRY.  THOSERESERVE ASSETS ARE

COMPRISED OF MONETARY GOLD, SPECIAL DRAWINGRIGHTS, THE

RESERVE POSITION IN THE IMF AND OTHER LIQUIDFOREIGN

CURRENCY ASSETS.  THE LATTER INCLUDESHORT-TERM

DEPOSITS IN NONRESIDENT AND RESIDENT BANKS,BALANCES IN

CURRENT ACCOUNTS, FOREIGN GOVERNMENTSECURITIES, REPO

AGREEMENTS WITH THESE SECURITIES MADEWITH

NONRESIDENTS, AND OTHER LIQUID ASSETS(ACCRUED INTEREST

ON THESE ASSETS IS NOT INCLUDED). MONETARY GOLD IS

EVALUATED AT USD300 PER TROY OZ. FOREIGN CURRENCY

ASSETS ARE CONVERTED INTO US DOLLARS ON THEBASIS OF

THE CROSS RATES OF FOREIGN CURRENCIES TO THEUSD,

CALCULATED USING THE OFFICIAL RATES OF THERUBLE TO

THESE FOREIGN CURRENCIES, SET BY THECBR.

 

6. MONETARY BASE (ML) IS COMPRISED OF CASHAND RESERVES

OF COMMERCIAL BANKS ON DEPOSIT IN THECBR.  IT IS THE

BASIC PART OF THE MONEY SUPPLY (M2).

 

7. LOMBARD CREDITS, DISTRIBUTED THROUGHAUCTIONS, ARE

AIMED TO PROVIDE THE LIQUIDITY TO THEBANKING SECTOR.

THESE CREDITS ARE EXTENDED TO BANKS ON THEBASIS OF

COLLATERAL (T-BILLS, OR MORE RECENTLY,SHARES).