**RUSSIAN ECONOMICAND FINANCIAL DEVELOPMENTS**

**FOR WEEK ENDINGDECEMBER 17, 1999**

** **

21DEC 99                               

SOURCE: U.S. EMBASSYMOSCOW

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FINANCIAL MARKETINDICATORS

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

 

1. FINANCIAL MARKETTRENDS

 

PREDICTIONS ABOUTTHE DECEMBER 19 PARLIAMENTARY

ELECTIONS DOMINATEDTHE FINANCIAL NEWS THIS WEEK.  WITH

INVESTORS IN ABULLISH MOOD, THE STOCK MARKET ROSE

SHARPLY ON HIGHTRADE VOLUMES.  THE RTS INDEXGAINED

11.75 PERCENT FORTHE WEEK.  ONE BROKER COMMENTED:"THE

END-OF-MILLENNIUMPARTY HAS BEGUN."

INTERNATIONALRESERVES INCREASED BY USD300 MILLION AND

TOTALED USD11.8BILLION.  THE MONETARY BASEINCREASED

SHARPLY, BY 4.44PERCENT OR R12.1 MILLION.  THEFINANCE

MINISTRY ISSUED NEWOFZ BONDS TO S-ACCOUNT HOLDERS,

WHILE THE CBR HAD TOCANCEL ITS OBR BOND AUCTION

BECAUSE BANKSDEMANDED 50 PERCENT P.A. YIELDS, WHILE

THE CBR WAS ONLYWILLING TO OFFER 20 PERCENT.

 

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

2. ECONOMIC ANDFINANCIAL MARKET DEVELOPMENTS

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

 

-- ON FRIDAY, THEFINANCE MINISTRY HELD ITS FIRST

PRIMARY GKO AUCTIONAND PLACED MORE THAN R600 MILLION

OF GKO ISSUE NUMBER134, MAINLY WITH NON-RESIDENT

INVESTORS WITHTRAPPED S-ACCOUNT RUBLES.  THEAVERAGE

YIELD WAS 4.2PERCENT P.A.  THE FINANCE MINISTRYWILL

HOLD THE NEXT GKOAUCTIONS ON DECEMBER 20 AND 21, 1999.

THE GOR HAS APPROVEDTHE ISSUANCE OF A TOTAL OF R361.1

BILLION IN NEW OFZBONDS.  THE FINANCE MINISTRY ALSO

PLANS TO ISSUE R12BILLION IN GKO'S.

 

-- GOSKOMSTATREPORTS THAT INDUSTRIAL PRODUCTION GREW

BY 7.8 PERCENTDURING THE FIRST 11 MONTHS OF 1999. THE

VOLUME OF PRODUCTIONTOTALED R2.6 TRILLION.

 

-- THE MINISTRY OFINTERNAL AFFAIRS (MVD) SAYS THAT R2

BILLION IN FEDERALFUNDS ALLOCATED FOR SOCIAL NEEDS

WERE STOLEN DURINGTHE FIRST 6 MONTHS OF 1999.  MVD

INITIATED MORE THAN15,500 CRIMINAL INVESTIGATIONS FOR

THEFT OF SOCIALFUNDS, RESULTING IN THE CONVICTION OF

2241INDIVIDUALS.  MVD ALSO REPORTED ANINCREASE IN

ILLEGAL ECONOMICACTIVITY, WITH MORE THAN 280,000

VIOLATIONSREGISTERED SINCE THE BEGINNING OF THE YEAR.

 

-- THE MOSCOWFEDERAL TAX POLICE CONCLUDED 2857 TAX

INSPECTIONS DURINGTHE FIRST 11 MONTHS OF 1999, WHICH

RESULTED IN THECOLLECTION OF R1.8 BILLION RUBLES.

 

-- TAX MINISTERALEKSANDER POCHINOK SAID THAT TAX

COLLECTIONS MAYREACH R330 BILLION THIS YEAR.  FORTHE

FIRST 11 MONTHS OF1999, TAX COLLECTIONS WERE R289

BILLION.

 

--ACCORDING TOGOSKOMSTAT, WAGE ARREARS WERE DOWN TO

50.8 BILLION INDECEMBER. COMPARED TO R53.1 BILLION AS

OF THE BEGINNING OFNOVEMBER.

 

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3.  BANK ALERT

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

 

-- THE CENTRAL BANKOF RUSSIA (CBR) REPORTED RUSSIA'S

GOLD AND CURRENCYRESERVES AT USD11.8 BILLION AS OF

DECEMBER 10, UPUSD300 MILLION FROM DECEMBER 3.

 

-- ON DECEMBER 14,THE CBR HELD AUCTIONS TO PLACE THREE

TRANCHES OF TWO-,THREE-, AND FOUR-MONTH BONDS, EACH

WORTH R2 BILLION,BUT HAD TO DECLARE THE AUCTIONS VOID

BECAUSE OF LACK OFPURCHASERS.  THE CBR WANTED TOPLACE

BONDS WITH YIELDS OFAPPROXIMATELY 20 PERCENT P.A., BUT

COMMERCIAL BANKSMADE BIDS OF AROUND 50 PERCENT P.A.,

AND STATE-CONTROLLEDSBERBANK AND VNESHECONOMBANK

REFRAINED FROMPARTICIPATION IN THE AUCTIONS.

 

-- THE AGENCY FORRESTRUCTURING CREDIT ORGANIZATIONS

(ARCO) PLANS TOISSUE ITS OWN BONDS IN THE MIDDLE OF

2000.  MOST OF THE BONDS WILL BE OFFERED TOINVESTORS

AS NON-TRADABLEINSTRUMENTS.  SOME OF THE BONDSWILL BE

USED TO RECAPITALIZEBANKS BEING RESTRUCTURED BY THE

AGENCY. ARCO ISNEGOTIATING WITH THE EUROPEAN BANK FOR

RECONSTRUCTION ANDDEVELOPMENT (EBRD) TO PLACE SOME OF

ITS BONDS, BUT SOFAR, EBRD HAS ONLY SAID THAT IT IS

INTERESTED INHELPING TO RESTRUCTURE SPECIFIC BANKS.

 

-- THE HEAD OF ARCO,ALEXANDER TURBANOV, SAID THAT

FUNDS FORRESTRUCTURING SBS-AGRO BANK MAY BE RELEASED

AT THE BEGINNING OFNEXT YEAR.  ARCO SO FAR HAS NOT

ALLOCATED ANY MONEYFOR RESTRUCTURING SBS-AGRO, BUT UP

TO R2 BILLION COULDBE EARMARKED FOR THIS PURPOSE.

FUNDS WOULD BEPROVIDED TO SBS-AGRO ONCE A SETTLEMENT

IS REACHED WITH THEBANK'S CREDITORS. SBS-AGRO OWES

DEPOSITORS MORE THANR7 BILLION.

 

-- ARCO MISSED ITSSTATUTORY DECEMBER 16 DEADLINE TO

PRESENT A DRAFTAMICABLE AGREEMENT WITH SBS-AGRO

CREDITORS. ARCO'SBOARD OF DIRECTORS PLANS TO DISCUSS

THE ISSUE ONDECEMBER 21.

 

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4. PRICES

---------

 

ACCORDING TO THERUSSIAN STATISTICAL AGENCY, INFLATION

DURING THE PERIOD DEC.1-14TOTALED 0.6 PERCENT.  DURING

THE WEEK OF DEC.7-14,PRICES GREW BY 0.3 PERCENT.

 

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5.    FINANCIAL MARKET TABLES

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

 

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A. THE RUBLE FIRMSUP SLIGHTLY

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THIS WEEK, THERE WASRELATIVELY HIGH DEMAND FOR DOLLARS

ON THE MICEX, BUT ITWAS OVERWEIGHTED BY A SHARP INCREASE

IN THE SUPPLY OFHARD CURRENCY, AS EXPORTERS, AND GAZPROM

IN PARTICULAR,BROUGHT IN MORE OF THEIR PROCEEDS. AS A

RESULT, WITHOUTSUPPORT FROM THE CBR, THE "TOD" RUBLE

FIRMED BY JUST 0.24PERCENT, WHILE THE AVERAGE MORNING

SESSION TURNOVERINCREASED BY MORE THAN 25 PERCENT FROM

LAST WEEK, TO USD224MILLION.  NOT SURPRISINGLY, THE

AVERAGE AFTERNOONSESSION TURNOVER FELL TO USD84.3

MILLION.

 

TABLE 1A: RUBLERATES -- MICEX SELT TRADING (NOTE 1)

 

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

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

   DATE     AVERAGE   VOLUME  AVERAGE   VOLUME

            PRICE   (USD MN)    PRICE   (USD MN)

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

 12/13/99     RUSSIAN HOLIDAY,  MARKETS CLOSED

 12/14/99  26.8215     211.47  26.8991   85.90

 12/15/99  26.8011     250.88  26.8536   84.10

 12/16/99  26.7719     195.61  26.7911   87.30

 12/17/99  26.7692     238.00  26.792O   79.80

 

TABLE 1B:  RUBLE RATES -- CASH RATES AT EXCHANGEPOINTS

(RUBLES PER USD)(NOTE 2)

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

                    PRCT CHNG           PRCTCHNG

   DATE     AVERAGE   AGAINST  AVERAGE   AGAINST

             BUY    WEEKAGO    SELL    WEEK AGO

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

 12/13/99     N/A       N/A       N/A       N/A

 12/14/99   26.89        0.41    27.07       0.30

 12/15/99   26.83       -0.41    27.08       -0.26

 12/16/99   26.83       -0.33    26.99       -0.59

 12/17/99   26.77       -0.19    26.99       -0.41

 

TABLE IC:  RUBLE RATES-- CBR OFFICIAL EXCHANGERATE

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

                     PRCT CHNG  PRCT CHNG

   DATE    OFFICIAL   AGAINST    AGAINST

            RATE     WEEKAGO   09/08/98

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

 12/13/99   26.8300        0.34      57.92

 12/14/99  26.8300        -0.04      57.92

 12/15/99  26.8200         0.00      57.86

 12/16/99  26.8000        -0.26      57.74

 12/17/99  26.7700        -0.37      57.56

 

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B. OFZ MARKET

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

 

ON TUESDAY ANDWEDNESDAY, PRICES OF OFZ ISSUES WERE

GENERALLY UP AS ARESULT OF THE INFLUX OF UNUSED RUBLES

FROM THE ORR AUCTIONCANCELED BY THE CBR.  LATER ON THE

WEEK, THE OFZ MARKETEXPERIENCED DOWNWARD PRESSURE

INITIATED BY NON-RESIDENTSWHO WERE SELLING OFZ'S TO

INCREASE THEIR RUBLELIQUIDITY BEFORE THE UPCOMING GKO

AUCTIONS.

 

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

C. SHORT-TERMINTERBANK DOWN AGAIN

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

 

RATES ON THE SHORT-INTERBANKRUBLE LOAN MARKET REMAINED

ON A RELATIVELYMODERATE LEVEL THROUGHOUT THE WEEK. ON

FRIDAY, WITH PLENTY OFRUBLES AVAILABLE, THE RATE FOR

ONE-DAY INTERBANKCREDIT DROPPED TO 6.6 PERCENT P.A.

BALANCES ON BANKS'CORRESPONDENT ACCOUNTS IN THE CBR

REACHED A MAXIMUM OFR65.1 BILLION ON FRIDAY, AN

INCREASE OF MORETHAN R9 BILLION SINCE MONDAY.

 

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TABLE 4: INTERBANKCREDIT

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

 

  DATE                     PERIOD (IN DAYS)

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

                   1     7     14     30     60     90

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

 

DEC 13   RUSSIAN HOLIDAY; MARKETS CLOSED

 

DEC 14   MIBID   09.8  13.0   15.0   26.0   28.0  28.0

        MIBOR   17.2   24.0   27.0  39.0   42.0  45.0

 

DEC 15   MIBID   09.4  10.0   13.0   25.0   24.0  23.0

        MIBOR   16.0   20.0   26.0  37.0   37.0  39.0

 

DEC 16   MIBID   08.2  10.0   12.0   24.0   23.0  22.0

        MIBOR   14.6   21.0   25.0  36.0   36.0  38.0

 

DEC 17   MIBID   06.6  10.0   12.0   24.0   23.0  22.0

        MIBOR   11.8   31.0   25.0  36.0   36.0  38.0

 

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D. STOCK MARKETSOARS

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

 

AFTER A WEEK OFDOWNWARD SLIDE, THE STOCK MARKET

EXPERIENCED A BURSTOF ACTIVITY AND A FOUR-DAY RALLY.

TRADE VOLUMES WEREHIGH.  ON TUESDAY, THE RTS INDEX

GAINED 8.25 PERCENTON VERY HIGH VOLUME OF USD22

MILLION, THE HIGHESTVOLUME SINCE NOVEMBER 11, 1999.

THE MAJOR PLAYERSWERE NON-RESIDENT INVESTORS.  LATERON

THE WEEK, TRADEACTIVITY SLOWED DOWN, BUT THE MARKET

CONTINUED TO GROWAND BROADEN.  FOR THE WEEK, THE RTS

INDEX GAINED 11.75PERCENT IN REAL TERMS.

 

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TABLE 5: RTS STOCKINDICES

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

                                              DOLLAR

 DATE    RTS INDEX        PERCENT CHANGE      ADJUSTED

          (R)      NOMINAL (RUB) REAL (USD)

 

DEC 13  RUSSIAN HOLIDAY; MARKETS CLOSED

DEC 14  657.79          1.20       1.36    109.03

DEC 15  711.85          8.22       8.25    118.03

DEC 16  713.92          0.29        0.36     118.46

DEC 17  723.66          1.36       1.48    120.21

 

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E. INTERNATIONALRESERVES

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

 

INTERNATIONALRESERVES OF THE CENTRAL BANK AND THE

FINANCE MINISTRY ASOF DECEMBER 10 INCREASED BY USD 300

MILLION TO USD 11.8BILLION, AN INCREASE OF 2.6

PERCENT. THEINCREASE IS A RESULT OF THE CBR BUYING

CURRENCY FROMEXPORTERS.

 

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TABLE 6:INTERNATIONAL RESERVES (NOTE 5)

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

 

INTERNATIONAL  BLN USD  PERCENT CHG PERCENT CHG

RESERVES                 PREV WK     01.01.99

 

12.10.99        11.8      2.6        -03.3

12.03.99        11.5     -0.9        -05.7

11.26.99        11.6     -1.7        -04.9

11.19.99        11.8      2.6        -03.3

11.12.99        11.5     -1.7        -05.7

 

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F. MONETARY BASE

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

 

THE MONETARY BASEINCREASED VERY SHARPLY DURING THE

PREVIOUS WEEK,TOTALING R284.7 BILLION ON DECEMBER 13,

ITS HIGHEST LEVELSINCE SEPTEMBER 7, 1998. BASE MONEY

WAS UP BY 4.4PERCENT, THE LARGEST INCREASE SINCE

OCTOBER 12,1998.  THE MONETARY BASE HAS GROWNBY 37.34

PERCENT SINCE THEBEGINNING OF THE YEAR.

 

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

TABLE 7: MONETARYBASE (NOTE 6)

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

 

MONETARY   BLN RUBLES    PRCT CHNG FROM       PRCT CHNGFROM

BASE                       PREV. WEEK       PREV. 4 WK AVG

 

12.13.99     284.7           4.44                 3.8

12.06.99     272.6           0.33                -1.1

11.29.99     271.7           -0.60                -1.0

11.22.99     276.3           -0.25                 1.2

11.15.99     277.0           -0.11                 1.9

 

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G. CORRESPONDENTACCOUNTS

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

 

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TABLE 9: BALANCES ONCORRESPONDENT ACCOUNTS

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

 

       DATE                BALANCE (BLN RUB)

      12.13.99       RUSSIAN HOLIDAY; MARKETS CLOSED

      12.14.99                    55.742

      12.15.99                    59.653

      12.16.99                    57.924

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H. RESERVEREQUIREMENTS

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

 

BANK RESERVESREQUIREMENTS HAVE REMAINED UNCHANGED SINCE JUNE

10, 1999.

 

 

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EXPLANATORY NOTES

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

 

1. EXCHANGE RATES:SELT - "SYSTEM OF ELECTRONIC LOT

(CURRENCY)TRADING" - A COMPUTER-BASED OTC-TYPE TRADING

SYSTEM ORGANIZED BYTHE MOSCOW INTERBANK CURRENCY

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

DOLLAR WITH THE SAMEDAY DELIVERY.  USD-TOM PRICE IS

THE PRICE OF THEDOLLAR WITH DELIVERY ON THE NEXT DAY.

MINIMUM LOT SIZE FOREACH OF THE DOLLAR INSTRUMENTS IS

USD100,000.  AVERAGE PRICE IS QUOTED AS THE WEIGHTED

AVERAGE OF ALL THEBIDS AND OFFERS ENTERED INTO THE

SYSTEM BY VARIOUSBANKS.

 

2. AVERAGE CASHRATES ARE QUOTED AS CALCULATED BY THE

INTER-LINEINFORMATION AGENCY THAT PROCESSES DATA FROM

OVER 5OO EXCHANGEPOINTS IN THE CITY OF MOSCOW.

 

3. INTEREST RATES:THE TABLE PROVIDES MOSCOW INTERBANK

BID (MIBID) ANDMOSCOW INTERBANK OFFERED RATE (MIBOR)

B ANNUALIZED AVERAGE BID AND OFFER RATES ONSHORT-TERM

RUBLE LOANS BETWEENCOMMERCIAL BANKS.

 

4. STOCK INDICES:THE RTS INDEX, IS THE ONLY OFFICIAL

INDICATOR OF THERUSSIAN TRADING SYSTEM.  IT IS

CALCULATED EVERY 30MINUTES OF THE RTS TRADE SESSION,

STARTING FROM12:00.  IT COMPRISES 60 SHARES OF35

LEADINGCOMPANIES.  THIS SHARES AREINCLUDED IN SO-

CALLED CATEGORY"A" LISTING.  THE INDEXINDICATES OVER-

THE-COUNTER STOCKPRICES.  THE INDEX REPRESENTS THE

RATIO OF THE TOTALMARKET CAPITALIZATION OF THE SHARES

OF THE COMPANIESSELECTED FOR THE INDEX TO THE TOTAL

MARKETCAPITALIZATION OF THE SAME SHARES AS OF THE

INITIAL DATEMULTIPLIED BY THE INDEX VALUE AS OF THE

INITIAL DATE (31DECEMBER, 1997) USING A BASE OF 100

BEGINNING SEPTEMBER1, 1995.  THE RUBLE-ADJUSTED INDEX

IS A DERIVATIVE OFTHE MAIN DOLLAR INDEX, USING THE

SAME BASE.

 

5. INTERNATIONALRESERVES OF THE RUSSIAN FEDERATION

REPRESENT THE AMOUNTOF RESERVE ASSETS OF THE BANK OF

RUSSIA AND FINANCEMINISTRY.  THOSE RESERVE ASSETS ARE

COMPRISED OFMONETARY GOLD, SPECIAL DRAWING RIGHTS, THE

RESERVE POSITION INTHE IMF AND OTHER LIQUID FOREIGN

CURRENCYASSETS.  THE LATTER INCLUDE SHORT-TERM

DEPOSITS INNONRESIDENT AND RESIDENT BANKS, BALANCES IN

CURRENT ACCOUNTS,FOREIGN GOVERNMENT SECURITIES, REPO

AGREEMENTS WITHTHESE SECURITIES MADE WITH

NONRESIDENTS, ANDOTHER LIQUID ASSETS (ACCRUED INTEREST

ON THESE ASSETS ISNOT INCLUDED).  MONETARY GOLD IS

EVALUATED AT USD300PER TROY OZ.  FOREIGN CURRENCY

ASSETS ARE CONVERTEDINTO US DOLLARS ON THE BASIS OF

THE CROSS RATES OFFOREIGN CURRENCIES TO THE USD,

CALCULATED USING THEOFFICIAL RATES OF THE RUBLE TO

THESE FOREIGNCURRENCIES, SET BY THE CBR.

 

6. MONETARY BASE(M1) IS COMPRISED OF CASH AND RESERVES

OF COMMERCIAL BANKSON DEPOSIT IN THE CBR.  IT IS THE

BASIC PART OF THEMONEY SUPPLY (M2).

 

7. LOMBARD CREDITS,DISTRIBUTED THROUGH AUCTIONS, ARE

AIMED TO PROVIDE THELIQUIDITY TO THE BANKING SECTOR.

THESE CREDITS AREEXTENDED TO BANKS ON THE BASIS OF

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