**RUSSIAN ECONOMICAND FINANCIAL DEVELOPMENTS**

**FOR WEEK ENDINGNOVEMBER 12, 1999**

** **

17 NOV 99

SOURCE: U.S. EMBASSYMOSCOW

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1. FINANCIAL MARKETTRENDS

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

 

THE RUSSIAN EQUITIESMARKET CAME ALIVE THIS WEEK,

DRIVEN BY MAINLYFOREIGN BUYING.  THE RTS ROSE 11.8

PERCENT ON THE WEEK,WITH IMPRESSIVE AVERAGE DAILY

VOLUME (BY RUSSIANSTANDARDS) OF USD 16.7 MILLION.

COMMODITY PRICESROSE FOR OIL, PLATINUM AND PALLADIUM.

 

MOST OTHER FINANCIALNEWS ALSO WAS UPBEAT. THE IMF TEAM

RETURNED TO MOSCOWTHIS WEEK TO TRY TO COMPLETE

NEGOTIATIONS WITHTHE GOR. THE DUMA APPROVED THE 2000

BUDGET IN SECONDREADING, AND LOWERED THE MAXIMUM

 INCOME TAX RATE TO 30 PERCENT. THEMINISTRY OF FINANCE

 ANNOUNCED ITS PLAN FOR MINFIN'S, ANDSAID THAT S-

 ACCOUNT HOLDERS WOULD BE ABLE TO INVESTIN GOR-APPROVED

 DIRECT INVESTMENTS.  THE RUBLE DEPRECIATED SLIGHTLY

 AGAINST THE DOLLAR.  INTERNATIONAL RESERVES DROPPED BY

 0.9 PERCENT TO USD11.7 BILLION.  THE MONETARY BASE WAS

 UP BY 3.10 PERCENT OR R3.1 BILLION.

 

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

 2. ECONOMIC AND FINANCIAL MARKETDEVELOPMENTS

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

 

 -- CURRENCY INFLOW IN RUSSIA DECREASEDBY 61 PERCENT IN

 THE FIRST HALF OF 1999 AND TOTALEDUSD4.5 BILLION.

 OUTFLOW OF CURRENCY WAS DOWN BY 53PERCENT AND TOTALED

 USD6.3 BILLION.

 

 -- THE MINISTRY OF STATE PROPERTYANNOUNCED THAT 49.8

 PERCENT OF THE TYUMEN OIL COMPANY WILLBE SOLD FOR

 USD80-90 MILLION.

 

 -- THE CENTER OF THE ECONOMIC SITUATIONATTACHED TO THE

 GOVERNMENT PROJECTS THAT THE NUMBER OFUNEMPLOYED

 PEOPLE WILL DECREASE TO 1.46 MILLION BYTHE END OF

 NOVEMBER, 22 PERCENT LOWER THAN ONE YEARAGO.

 

 -- PRIME MINISTER PUTIN ANNOUNCED THATPENSION

 INDEXATION WILL BE 28 PERCENT FOR THEPERIOD NOVEMBER

 1, 1999 THROUGH FEBRUARY 1, 2000.  HE ALSO ANNOUNCED

 THAT IN DECEMBER THE GOVERNMENT WILL PAYCOMPENSATION

 OF RSO TO EACH PENSIONER.

 

 -- ACCORDING TO TAX MINISTER POCHINOK,THE TAX MINISTRY

 IS DEVELOPING A NEW PROGRAM"CONCERNING WORK WITH

 EXCISES" WHICH WILL HELP TOINCREASE EXCISE TAX

 COLLECTIONS FROM RL BILLION TO R1.5MILLION PER MONTH.

 

 --------------                                            .

 3. BANK ALERT

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

 

 -- THE HEAD OF AGROPROMBANK'S TEMPORARYMANAGEMENT,

 VLADIMIR LIMONOV, SAID THAT THE BANKSHOULD BE DECLARED

 BANKRUPT. THE BANK IS NOT CAPABLE OFPAYING OFF ITS

 CREDITORS AND HAS NO RESOURCES TO MAKEOBLIGATORY

 PAYMENTS.  THE TOTAL OBLIGATIONS OF THE BANK AMOUNT TO

.R17.7 BILLION,WHILE ITS TOTAL LIQUID ASSETS AMOUNT TO

 ONLY R17.7 MILLION.

-- ACCORDING TO THECENTRAL BANK OF RUSSIA, THE TOTAL

NUMBER OF CREDITORGANIZATIONS IN THE RUSSIAN

FEDERATION DECREASEDBY 10 IN OCTOBER, TO 1375.  DURING

THE FIRST 1O MONTHSOF 1999, 101 CREDIT ORGANIZATION

WENT OUT OF BUSINESS.  HOWEVER, IN OCTOBER, THE NUMBER

OF BANKS WITHAUTHORIZED CAPITAL GREATER THAN R40

MILLION INCREASEDFROM 264 TO 272.

 

-- THE TRANSPORTMINISTRY AND VNESHECONOMBANK ANNOUNCED

A MUTUAL PROJECTAIMED AT ATTRACTING INVESTMENT TO THE

RUSSIAN SHIPBUILDINGINDUSTRY. THE TRANSPORT MINISTRY

HOPES TO ATTRACTUSD200 MILLION IN INVESTMENT CAPITAL.

 

-- THE HEAD OF THETEMPORARY MANAGEMENT OF

PROMSTROYBANK,MIKHAIL GARUTIN, ANNOUNCED THAT THE BANK

HAS VIOLATED BOTHTAX AND BANKING LAWS.  THE BANK

STOPPED ALL TAX ANDOTHER OBLIGATORY PAYMENTS AFTER ITS

LICENSE WAS REVOKED.

 

-- FOREIGN INVESTORSAGREED TO RESTRUCTURE THE ARREARS

OF ONEXIMBANK.  MORE THAN 90 PERCENT OF THE BANK'S

CREDITORS (FORWARDCONTRACTS AND INTERBANK CREDITS)

AGREED WITH THECONDITIONS PROPOSED BY THE BANK.

-- THE BANK OFMOSCOW PROLONGED THE DEADLINE FOR MAKING

PAYMENTS TOCREDITORS OF MOSBUSINESSBANK.  BANKOF

MOSCOW STARTED TOPAY MOSBUSINESSBANK DEPOSITORS WHO

HAD LESS THAN R5,000ON THE ACCOUNTS ON OCTOBER 25,

1999, WHICH ACCOUNTFOR 95 PERCENT OF ALL DEPOSITS IN

MOSBUSINESSBANK.

 

---------

4. PRICES

---------

 

ACCORDING TO THERUSSIAN STATISTICAL AGENCY, INFLATION

FOR THE FIRST 9 DAYSOF NOVEMBER TOTALED 0.3 PERCENT.

THE AVERAGE DAILYINFLATION DECREASED THIS MONTH TO

0.029 PERCENTCOMPARED WITH 0.044 IN OCTOBER WHEN THE

INFLATION RATE WAS1.4 PERCENT.

 

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5.    FINANCIAL MARKET TABLES

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

 

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A. RUBLE VOLATILE

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

AS USUALLY HAPPENSIN RUSSIA AFTER A LONG WEEKEND, THERE

WAS AN IMBALANCEBETWEEN RUBLE SUPPLY AND DEMAND AT THE

BEGINNING OF THEWEEK.  THIS TIME SELLERS OF DOLLARSWERE

IN THE MAJORITY, ANDTHE CBR HAD TO INTERVENE TO PREVENT

THE RUBLE FROMAPPRECIATING SHARPLY.  LATER ON INTHE

WEEK, THE MARKET COOLEDOFF.  THE RUBLE DROPPED

CONSIDERABLY ONFRIDAY.  FOR THE WEEK, THE RUBLELOST

0.28 PERCENT ON THEUSDTOO SESSION AND 0.32 PERCENT ON

THE AFTERNOONSESSION FOR THE USDTOM.

 

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

 

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

           USD-TOO   USO-TOO   USD-TOM  USO-TOM

   DATE     AVERAGE   VOLUME  AVERAGE   VOLUME

            PRICE   (USD MN)    PRICE   (USD MN)

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

 11/08/99   RUSSIAN  MARKETS

           HOLIDAY   CLOSED

 11/09/99  26.1861  125.45   26.1503    29.7

 11/10/99  26.1051  224.26   NO TRADE

 11/11/99  NO TRADE           26.2037    27.1

 11/12/99  26.3075  180.91   26.3533    72.9

 

TABLE 1B:  RUBLE RATES -- CASH RATES AT EXCHANGE POINTS

(RUBLES PER USD)(NOTE 2)

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

                    PRCT CHNG           PRCTCHNG

   DATE    AVERAGE   AGAINST  AVERAGE   AGAINST

             BUY    WEEKAGO    SELL    WEEK AGO

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

11/08/99   RUSSIAN    MARKETS

          HOLIDAY    CLOSED

11/09/99   26.11       -0.46  26.31       -0.79

11/10/99   26.08       -0.19  26.32       -0.27

11/11/99   26.11       -0.23  26.33       -0.15

11/12/99   26.22        0.42  26.49        0.46

 

TABLE 1C:  RUBLE RATES-- CBR OFFICIAL EXCHANGERATE

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

                    PRCT CHNG  PRCT CHNG

   DATE    OFFICIAL   AGAINST    AGAINST

             RATE     WEEKAGO   09/08/98

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

  11/08/99   RUSSIAN      MARKETS

           HOLIDAY     CLOSED

  11/09/99  26.2300       -0.61      54.39

  11/10/99  26.1900       -0.68      54.15

  11/11/99  26.1100       -0.57      53.68

  11/12/99  26.1100       -0.50      53.68

 

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

 B. OFZ MARKET

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

 

 AT THE BEGINNING OF THE WEEK, YIELDS ONLONG-TERM OFZ

 WERE UP, ALMOST HITTING THE 100 PERCENTP.A. LEVEL.  ON

 WEDNESDAY, HOWEVER, PRICES BEGAN TO GROWSLIGHTLY AND

 YIELDS DECLINED TO 96-97 PERCENT.  TRADE VOLUME THAT

 DAY REACHED R1.6 BILLION DUE TONEGOTIATED DEALS.  THE

 PRICE GROWTH CONTINUED ON THURSDAY, BUTON FRIDAY, THE

 MARKET WITNESSED DOWNWARD PRICECORRECTIONS, WHICH

 BROUGHT THE YIELD ON THE LONG OFZS DOWNTO THE 95-96

 PERCENT P.A. LEVEL.  THE SHORTEST OFZ ISSUE, NUMBER

 022, FINISHED THE WEEK ON THE LEVEL OF67 PERCENT P.A.

 

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

C. SHORT-TERMINTERBANK DOWN AGAIN

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

 

SHORT-INTERBANKRUBLE LOAN RATES STAYED AT RELATIVELY

LOW LEVELS, WITHLITTLE BANK ACTIVITY IN THE MARKET

THIS WEEK.  THE BALANCES ON BANKS' CORRESPONDENT

ACCOUNTS IN THE CBRWERE LOW ON TUESDAY, THE FIRST DAY

AFTER THE HOLIDAY,BUT THEN BEGAN TO INCREASE, REACHING

R56.1 BILLION ONFRIDAY.

 

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

TABLE 4: INTERBANKCREDIT

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

 

 DATE                     PERIOD (IN DAYS)

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

                  1     7     14     30     60     90

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

 

NOV 08   MIBID   RUSSIAN HOLIDAY, MARKETS CLOSED

        MIBOR

 

NOV 09   MIBID   07.0  07.0   10.0   20.0   24.0  25.0

        MIBOR   14.2   17.0   20.0  31.0   36.0  40.0

NOV 10   MIBID   10.6  10.0   14.0   20.0   25.0  26.0

         MIBOR   19.0  22.0   26.0   32.0   38.0  40.0

 

NOV 11   MIBID   09.0  09.0   13.0   20.0   25.0  27.0

        MIBOR   16.2   20.0   26.0  32.0   37.0  42.0

 

NOV 12   MIBID   07.3  08.0   12.0   18.0   25.0  25.0

        MIBOR   15.0   18.0   22.0  30.0   40.0  40.0

 

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

 D. STOCK MARKET RALLIES

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

 

THE RUSSIAN STOCKMARKET CAME BACK STRONGLY AFTER THE

REVOLUTION DAYHOLIDAY, LED BY THE ACTIVE BUYING OF NON-

RESIDENTS.  TRADE VOLUMES WERE HIGH THROUGHOUT THEWEEK,

AVERAGING USD 16.7MILLION PER DAY FOR THE WEEK, AND

REACHING A MAXIMUMOF USD25.1 MILLION ON THURSDAY, WHICH

IS THE HIGHESTVOLUME SINCE JUNE 8, 1999 (COMPARED TO A

LOW OF USD1.5MILLION THE WEEK BEFORE). RECOVERING

WORLD MARKETS ANDGROWING OIL PRICES ADDED FUEL TO THE

MARKET RALLY.  BY THE END OF THE WEEK, SOME MARKET

PARTICIPANTSPREFERRED TO CLOSE THEIR POSITIONS, WHICH

PUSHED THE MARKETDOWN A LITTLE BIT ON FRIDAY.  THE RTS

INDEX FINISHED UP BY11.75 PERCENT FOR THE WEEK IN REAL

TERMS.

 

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

 TABLE 5: RTS STOCK INDICES

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

                                                DOLLAR

   DATE    RTS INDEX        PERCENT CHANGE      ADJUSTED

            (R)      NOMINAL (RUB) REAL (USD)

 

   NOV 08  RUSSIAN HOLIDAY MARKETS CLOSED

   NOV 09  625.26          6.15       6.19    106.01

   NOV 10  653.63          4.54       4.70    110.98

   NOV 11  663.66          1.54       1.85    113.03

   NOV 12  655.00         -1.31       0.17    111.56

 

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

   E. INTERNATIONAL RESERVES

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

 

   INTERNATIONAL RESERVES OF THECENTRAL BANK AND THE

   FINANCE MINISTRY DROPPED BYUSD100 MILLION AND TOTALED

   USD11.7 BILLION. ACCORDING TO THECBR, INTERNATIONAL

   RESERVES INCLUDE USD175 MILLIONHELD IN THE CBR'S

   OVERSEAS SUBSIDIARIES, DOWN FROMUSD242 MILLION ON THE

WEEK BEFORE. THISDROP IN HOLDINGS IN OVERSEAS

SUBSIDIARIESREFLECTS CHANGES IN RESERVE ACCOUNTING.

 

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

TABLE 6:INTERNATIONAL RESERVES (NOTE 5)

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

 

INTERNATIONAL  BLN USD  PERCENT CHG PERCENT CHG

RESERVES                 PREV WK     01.01.99

 

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

10.08.99        11.6      3.6        -04.9

 

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F. MONETARY BASE

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

 

THE MONETARY BASEINCREASED CONSIDERABLY THIS WEEK BY

3.1 PERCENT OR R8.2BILLION AND TOTALED R277.7 BILLION.

 

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

TABLE 7: MONETARYBASE (NOTE 6)

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

 

MONETARY   BLN RUBLES    PRCT CHNG FROM       PRCT CHNGFROM

BASE                       PREV. WEEK        PREV. 4 WK AVG

 

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

10.18.99     272.0           2.06                 3.5

10.11.99     266.5

     2.89                 1.4

 

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

G. CORRESPONDENTACCOUNTS

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

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TABLE 9: BALANCES ONCORRESPONDENT ACCOUNTS

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

 

        DATE                BALANCE (BLN RUB)

      10.25.99                    52.676

      10.26.99                    55.897

      10.27.99                    59.827

      10.28.99                    63.295

      10.29.99                    59.359

 

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

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 THEBIDS AND OFFERS ENTERED INTO THE

SYSTEM BY VARIOUSBANKS.

 

2. AVERAGE CASHRATES ARE QUOTED AS CALCULATED BY THE

INTER-LINE INFORMATIONAGENCY THAT PROCESSES DATA FROM

OVER 500 EXCHANGEPOINTS IN THE CITY OF MOSCOW.

 

3. INTEREST RATES:THE TABLE PROVIDES MOSCOW INTERBANK

BID (MIBID) ANDMOSCOW INTERBANK OFFERED RATE (MIBOR)

-- ANNUALIZEDAVERAGE BID AND OFFER RATES ON SHORT-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

LEADING COMPANIES.  THIS SHARES ARE INCLUDED 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, AND OTHERLIQUID 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(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).