**RUSSIAN ECONOMICAND FINANCIAL DEVELOPMENTS**

**FOR WEEK ENDINGDECEMBER 3, 1999**

** **

9 DEC 99

SOURCE: U.S. EMBASSYMOSCOW

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

FINANCIAL MARKETINDICATORS

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

 

1. FINANCIAL MARKETTRENDS

 

THE MAJOR FINANCIALNEWS THIS WEEK WERE REPORTS THAT

THE GOR HAD NOTREACHED AN AGREEMENT WITH LONDON CLUB

CREDITORS AND THATTHE IMF WAS UNLIKELY TO RELEASE THE

NEXT IMF TRANCHETHIS YEAR. POLITICAL UNCERTAINTY

HEIGHTENED WITH THEHOSPITALIZATION OF PRESIDENT

YELTSIN AND THEAPPROACH OF DUMA ELECTIONS. STOCK

MARKET ACTIVITYDECLINED. THE RTS LOST 1.32 PERCENT FOR

THE WEEK IN REALTERMS. INTERNATIONAL RESERVES

DECREASED BY USD200MILLION, OR 1.7 PERCENT, TO USD11.6

BILLION.  THE MONETARY BASE DROPPED BY 0.60PERCENT OR

R).66 BILLION.

 

THE GOOD NEWS THISWEEK WAS AN ANNOUNCEMENT BY MORGAN

STANLEY DEAN WITTERTHAT INVESTMENT RETURNS ON THE

RUSSIAN MARKET IN1999 WERE 130 PERCENT, THE HIGHEST IN

THE WORLD.

 

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

2. ECONOMIC ANDFINANCIAL MARKET DEVELOPMENTS

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

 

--. ACCORDING TO THERUSSIAN STATISTICAL AGENCY, THE

SHARE OF INCOME THATRUSSIANS USE TO BUY HARD CURRENCY

DECREASED 37 PERCENTDURING THE FIRST 10 MONTHS OF

1999, COMPARED TO1998.  RUSSIANS USED 8.6 PERCENT OF

THEIR INCOMES TO BUYCURRENCY COMPARED TO 13.7 PERCENT

DURING THE SAMEPERIOD OF 1998.

 

-- PRELIMINARY DATAFROM THE TAX MINISTRY INDICATES

THAT THE MINISTRYTRANSFERRED MORE THAN R44 BILLION TO

THE FEDERAL BUDGETIN NOVEMBER.  IN OCTOBER, THE TAX

MINISTRY TRANSFERREDR40.5 BILLION.  TAX MINISTRY MONEY

TRANSFERS TO THEFEDERAL GOVERNMENT TOTALED R291

BILLION DURING THEFIRST 11 MONTHS OF 1999.

-- THE MOSCOWINTERBANK CURRENCY EXCHANGE (MICEX)

ANNOUNCED THAT FOURCORPORATE BONDS ARE CURRENTLY BEING

TRADED ON MICEX -GAZPROM, LUKOIL, TNK AND ALROSA.

MONTHLY TRADEVOLUMES INCREASED TO R513.2 MILLION IN

NOVEMBER.  THE MARKET CAME INTO EXISTENCE IN JUNEOF

1999 WITH THEPLACEMENT OF LUKOIL OBLIGATIONS.

 

-- ACCORDING TOMIKHAIL ZADORNOV, THE FORMER ENVOY OF

THE PRESIDENT TO THEINTERNATIONAL FINANCIAL

ORGANIZATIONS, THEEXTERNAL DEBT OF THE RUSSIAN

FEDERATION ISCURRENTLY USD160 BILLION. USD11O BILLION

OF THIS DEBT ISSOVIET-ERA DEBT.

 

-- ACCORDING TOECONOMY MINISTER ANDREI SHAPOVAL'YANTS,

THE REAL INCOME OFTHE RUSSIAN POPULATION WILL INCREASE

BY A MINIMUM OF 3PERCENT IN 2000.  IN 2001-2003,THEIR

INCOMES WILLINCREASE AT AN ANNUAL RATE OF 5-7 PERCENT.

 

-- THE RUSSIANSTATISTICAL AGENCY REPORTS THAT 58.6

PERCENT OF RUSSIANENTERPRISES WERE PROFITABLE IN THE

FIRST 9 MONTHS OF1999.  THE MOST PROFITABLE

ENTERPRISES WERE INTHE TRANSPORTATION AND INDUSTRY

SECTORS.

 

-- ACCORDING TO THETRADE MINISTRY, ARREARS ON PAYMENTS

OF UNEMPLOYMENTWELFARE DECREASED BY 36.3 PERCENT

(R1.33 BILLION)SINCE THE BEGINNING OF THE YEAR, AND

TOTALED R2.33BILLION IN NOVEMBER.

 

-- MORGAN STANLEYDEAN WITTER & CO. REPORTS THAT

INVESTMENT IN RUSSIAIN 1999 WAS THE MOST PROFITABLE IN

THE WORLD.  THE COMPANY REPORTED PROFITS OF 130PERCENT

FROM INVESTING INRUSSIAN STOCK AND OBLIGATIONS THIS

YEAR, LEAVING EVENU.S. INTERNET STOCKS IN THE DUST,

WITH PROFITS OF'ONLY' 115 PERCENT.

 

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

3.  BANK ALERT

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

 

-- THE CENTRAL BANKWILL HOLD 3 DEPOSIT AUCTIONS FOR

RESIDENT BANKS ONDECEMBER 9, 1999.  DEPOSIT MATURITIES

WILL BE 1 WEEK, 2WEEKS AND ONE MONTH.  MINIMUM

DEPOSITS WILL BE R20MILLION FOR MOSCOW BANKS AND R5

MILLION FOR BANKSREGISTERED IN THE OTHER REGIONS.

INTEREST RATES WILLVARY WITH THE DURATION OF THE

DEPOSIT. ONE-WEEKOPPOSITES WILL PAY 6 PERCENT P.A.,

TWO-WEEK DEPOSITSWILL PAY 10 PERCENT P.A. AND ONE

MONTH OPPOSITES WILLPAY 18 PERCENT P.A.

 

-- ACCORDING TO THECHAIRMAN OF UNEXIMBANK, MIKHAIL

PROKHOROV, THE BANKPLANS TO RESTRUCTURE IT'S DEBTS IN

THREE MONTHS ANDSIGN AN AGREEMENT WITH ITS CREDITORS.

IT ALSO WANTS TOMERGE WITH ROSBANK AND WILL ASK ARKO

FOR HELP IN THEPROCESS OF TAX RESTRUCTURING.

 

-- BANK"RUSSIAN STANDARD" HAS INCREASED IT'S

AUTHORIZED CAPITALFROM R36 MILLION TO R478 MILLION

WITH AN ISSUANCE OFSTOCK REGISTERED WITH THE CBR LAST

WEEK.  ALL OF THE STOCK WAS PURCHASED BY THECOMPANY

"RUSSIANSTANDARD," THE BANK'S MAIN STOCKHOLDER AND THE

OWNER OF THE RUSSIANSTANDARD TRADEMARK.

 

-- ACCORDING TOCENTRAL BANK STATISTICS, THE PERCENTAGE

OF THE REGISTEREDAUTHORIZED CAPITAL OF CREDIT

ORGANIZATIONS HELDBY NON-RESIDENTS WAS 11.48 PERCENT

IN OCTOBER, DOWNFROM 12.58 PERCENT IN JULY.

 

-- THE CBR HASPROHIBITED NON-RESIDENT HOLDERS OF

RESTRICTED RUBLE"S" ACCOUNTS TO USE THEIR RESTRICTED

RUBLES TO PURCHASESECURITIES IN OFF-EXCHANGE

NEGOTIATEDTRANSACTIONS. "S" ACCOUNT HOLDERS CAN

PURCHASE SECURITIESONLY ON MICEX.

 

-- ON NOVEMBER 30,THE FINANCE MINISTRY REGISTERED THE

PROSPECTUS FOR THEISSUANCE OF CENTRAL BANK BONDS. THE

CBR PLANS TO ISSUEBONDS OF 3, 4, AND 5 MONTH DURATION,

EACH ISSUANCE OF R2BILLION PAR VALUE.  THE CBR CAN

BEGIN TO ISSUE THEBONDS ON DECEMBER 14, 1999.

 

---------

4. PRICES

---------

 

ACCORDING TO THERUSSIAN STATISTICAL AGENCY, INFLATION

DURING THE PERIODNOV.L-22 TOTALED 0.8 PERCENT. DURING

THE WEEK OF NOV.16-22PRICES GREW BY 0.3 PERCENT.

AVERAGE DAILYINFLATION IN THE FIRST THREE WEEKS OF

NOVEMBER WAS 0-038PERCENT, COMPARED WITH 0.044 IN

OCTOBER WHEN THEINFLATION RATE WAS 1.4 PERCENT. THE

AGENCY ESTIMATESTHAT INFLATION WILL BE 1.1-1.3 PERCENT

IN NOVEMBER.

 

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

5.    FINANCIAL MARKET TABLES

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

 

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A. RUBLE DOWN AGAIN

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AT THE BEGINNING OFTHE WEEK, AN INCREASE IN EXPORT PROCEEDS

COMBINED WITH NORMALEND-OF-MONTH LOW RUBLE LIQUIDITY PREVENTED

THE RUBLE FROMFALLING TOO SHARPLY.  THE CENTRALBANK REFRAINED

FROM INTERVENING THEMARKET, PERHAPS BECAUSE THE NEGATIVE NEWS

ABOUT THE IMF WOULDHAVE MADE ANY INTERVENTION INEFFECTIVE. ON

WEDNESDAY, DECEMBER1, RUBLE LIQUIDITY INCREASED SHARPLY,

LEADING THE USD RATETO A NEW LOW OF R26.75 PER DOLLAR ON THE

UNIFIEDSESSION.  THE RUBLE CONTINUED TODEPRECIATE THRU THE

REST OF THEWEEK.  FOR THE WEEK, THE RUBLE WEAKENEDBY 1.18

PERCENT ON THEUNIFIED SESSION FOR THE USDTOD AND BY 1.21

PERCENT ON THESESSION FOR THE USDTOM.

 

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)

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

11/29/99  26.4206   202.41  26.4829    105.1

11/30/99  26.5280   189.54  26.6110    253.6

12/01/99  26.7450   155.35  26.7057    151.7

12/02/99  26.6796   164.03  26.7065    38.0

12/03/99  26.7408   140.38  26.8157    111.0

 

TABLE LB:  RUBLE RATES -- CASH RATES AT EXCHANGEPOINTS

(RUBLES PER USD)(NOTE 2)

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

                    PRCT CHNG           PRCTCHNG

   DATE     AVERAGE   AGAINST  AVERAGE   AGAINST

             BUY    WEEKAGO    SELL    WEEK AGO

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

 11/29/99   26.41        0.08  26.59       -0.08

 11/30/99   26.49        0.26  26.75        0.49

 12/01/99   26.60        0.83   26.84        0.94

 12/02/99   26.60        0.80   26.80        0.75

 12/03/99   26.70        0.98  26.89        1.89

 

TABLE IC:  RUBLE RATES-- CBR OFFICIAL EXCHANGERATE

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

                     PRCT CHNG  PRCT CHNG

  DATE    OFFICIAL   AGAINST    AGAINST

             RATE     WEEKAGO   09/08/98

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

 11/29/99  26.4300        0.15      55.56

 11/30/99  26.4200       -0.26      55.50

 12/01/99  26.5300        0.23      56.15

 12/02/99  26.7500        1.21      57.45

 12/03/99  26.6800        0.95      57.03

 

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B. OFZ MARKET

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

 

PRICES ON THESECONDARY OFZ MARKET CONTINUED TO GROW

THIS WEEK. DEMANDWAS HIGH FOR LONG-TERM PAPER DURING

THE WEEK, PUSHINGYIELDS DOWN TO 82-83 PERCENT P.A.

 

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

C. SHORT-TERMINTERBANK DOWN AGAIN

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

 

SHORT-INTERBANKRUBLE LOAN RATES INCREASED SHARPLY AT

THE END OFNOVEMBER.  RUBLE LIQUIDITY NORMALLY

DECREASES AT THE ENDOF THE MONTH. RATES WENT AS HIGH

AS 16.4 PERCENT P.A.FOR ONE-DAY DEPOSITS IN THE LAST

FEW DAYS OFNOVEMBER. HOWEVER, BY FRIDAY, DECEMBER 3,

RATES HAD DROPPEDBACK DOWN TO 5 PERCENT P.A.

 

BALANCES ON BANKS'CORRESPONDENT ACCOUNTS IN THE CBR

DECREASED DURING THEBEGINNING OF THE WEEK, REACHING A

LOW OF R54.6 BILLIONON TUESDAY, BUT THEN INCREASED

SHARPLY THE NEXT DAYTO R65 BILLION.  THE RUBLE INFLOW

IS PARTIALLYEXPLAINED BY A CBR "SWAP" OPERATION - ON

TUESDAY MORNING,WHEN RUBLE LOAN RATES SHARPLY

INCREASED, THE CBRBEGAN TO PUMP RUBLES INTO THE

MARKET.  ON WEDNESDAY, IT CLOSED ITS POSITION BY

SELLING DOLLARS.

 

BALANCES ON BANKCORRESPONDENT ACCOUNTS ARE EXPECTED TO

DROP IN MID-DECEMBER,WHEN THE CBR BEGINS ISSUING R6

BILLION OF ITS OWNBONDS (SEE BANK ALERT SECTION

ABOVE).  THE BONDS ARE INTENDED TO REDUCE RUBLE

LIQUIDITY.

 

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

 TABLE 4: INTERBANK CREDIT

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

 

  DATE                     PERIOD (IN DAYS)

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

                   1     7     14     30     60     90

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

 

 NOV 29   MIBID  05.2   08.0   14.0   21.0  32.0  29.0

          MIBOR   11.6   18.0  24.0   34.0   48.0  45.0

 

 NOV 30   MIBID  16.4   20.0   15.0   25.0  25.0  20.0

          MIBOR   33.0   35.0  30.0   40.0   40.0  40.0

 

 DEC 01   MIBID  11.6   10.0   12.0   25.0  32.0  30.0

          MIBOR   18.4   22.0  25.0   45.0   48.0  47.0

 

 DEC 02   MIBID  07.4   08.0   12.0   25.0  32.0  30.0

          MIBOR   14.6   18.0  22.0   40.0   48.0  47.0

 

 DEC 03   MIBID  05.0   08.0   12.0   27.0  32.0  30.0

          MIBOR   10.5   18.0  22.0   40.0   48.0  47.0

 

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D. STOCK MARKET UPSLIGHTLY

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

THE STOCK MARKETSLID DOWNWARD AT THE BEGINNING OF THE

WEEK, INITIATED BYNEGATIVE NEWS ABOUT THE IMF TRANCHE

RELEASE AND THELONDON CLUB NEGOTIATIONS.  IN MID-WEEK,

HOWEVER, WHEN THEPRICE OF URALS OIL PRICE REACHED A 1O-

YEAR HIGH OFUS025.93/BARREL, THE MARKET BEGAN TO CLIMB

AGAIN. STOCKS OF OILCOMPANIES WERE THE MARKET LEADERS,

WITH BOTH RESIDENTSAND NON-RESIDENTS ACTIVE IN THE

MARKET. FOR THEWEEK, THE RTS INDEX LOST 1.32 PERCENT IN

REAL TERMS.

 

TRADE ACTIVITY HASDECREASED, WITH MANY MARKET

PARTICIPANTSPREFERRING TO REMAIN ON THE SIDELINES AS

PARLIAMENT ELECTIONSAPPROACH. ACCORDING TO RTS

STATISTICS, THEMONTHLY TRADE VOLUME IN NOVEMBER TOTALED

USD269.4 MILLION(COMPARE TO USD157.2 MILLION IN

OCTOBER). THIS ISTHE HIGHEST TRADE VOLUME SINCE JULY

1999.  THE AVERAGE DAILY VOLUME WAS USD12.8MILLION.

 

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

TABLE 5: RTS STOCKINDICES

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

                                              DOLLAR

 DATE    RTS INDEX        PERCENT CHANGE      ADJUSTED

          (R)      NOMINAL (RUB) REAL (USD)

 

 NOV 29  693.23         -2.60       -2.60     116.64

 NOV 30  667.53         -3.71       -3.67     112.36

 DEC 01  676.61          1.36       0.93    113.41

 DEC 02  690.27          2.02       1.18    114.75

 DEC 03  708.98          2.71       2.98    118.17

 

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

 E. INTERNATIONAL RESERVES

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

 

 INTERNATIONAL RESERVES OF THE CENTRALBANK AND THE

 FINANCE MINISTRY DROPPED BY USD200MILLION AND TOTALED

 USD11.6 BILLION.  THIS DROP MOST PROBABLY WAS CAUSED BY

 CBR INTERVENTIONS IN THE CURRENCY MARKETTO SUPPORT THE

 RUBLE.

 

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

 TABLE 6: INTERNATIONAL RESERVES (NOTE 5)

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

 

 INTERNATIONAL  BLN USD  PERCENTCHG  PERCENT CHG

 RESERVES                 PREV WK     01.01.99

 

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

11.05.99        11.7     -0.9        -04.1

10.29.99        11.8      0.9        -03.5

 

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F. MONETARY BASE

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

THE MONETARY BASEDECREASED FOR THE THIRD WEEK IN A ROW

THIS WEEK ANDTOTALED R271.7 BILLION, 0.6 PERCENT LOWER

THAN THE PREVIOUSWEEK.

 

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

TABLE 7: MONETARYBASE (NOTE 6)

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

 

MONETARY   BLN RUBLES    PRCT CHNG FROM       PRCT CHNGFROM

BASE                       PREV. WEEK       PREV. 4 WK AVG

 

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

11.09.99     277.3           3.05                 2.8

11.01.99     266.8           -1.59                -0.1

 

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G. CORRESPONDENTACCOUNTS

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

 

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

TABLE 9: BALANCES ONCORRESPONDENT ACCOUNTS

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

 

       DATE                BALANCE (BLN RUB)

      11.29.99                    58.696

      11.30.99                    54.600

      12.01.99                    65.020

      12.02.99                    62.326

      12.03.99                    59.185

 

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H. RESERVEREQUIREMENTS

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

 

BANK RESERVESREQUIREMENTS REMAIN 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 THEBIOS 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 500EXCHANGE POINTS 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

RADIO 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 (31 DECEMBER,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 US0300PER 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(ML) 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).