The MICEX Success Story
Director of Equity Financing, FINAM Investment Company, Moscow
Recently the Moscow Interbank Currency Exchange (MICEX) summarized its results for 2006 and some notable achievements so far this year. In 2006, the total volume of transactions on the MICEX in non-government securities, including operations in stocks, bonds and REPOs, grew 3.2 times and reached 20.38 trillion rubles ($ 754.9 billion) versus 6.40 trillion rubles ($ 225.6 billion) in 2005.
The daily average volume of transactions in stock assets reached 82.5 billion rubles ($3.1 billion) per day. In January-March 2007, the volume of transactions in non-government securities on the MICEX SE reached 7.82 trillion rubles ($297.4 billion), 2.5 times more than in the first quarter of 2006, while the daily average volume of transactions reached 137.2 billion rubles ($5.2 billion). In 2006, efforts to organize IPOs on the stock market began to bear fruit with seven major corporate IPOs, including Rosneft, Severstal, OGK-5 and some others, which together raised about 350 billion rubles (over $13.2 billion).
As of early 2007, 586 firms were providing access to trading for 265,000 investors (in 2006 134,000), including over 24,000 legal entities, over 230,000 individual investors, 2,000 non-residents and almost 8,000 institutional investors. In April 2007, the number of participants in trading reached 600 firms which serve over 326,000 clients. Of course, these numbers are still very small compared to the magnitude of the New York or London stock exchanges, but here in Russia, we are learning quickly.
The London Stock Exchange and the MICEX hosted joint conferences in Moscow in 2006 and this year
OMX’s Aggressive Drive into Emerging Markets
OMX Group continues its program of increasing its presence in Europe. According to OMX’s top management, the group is already represented as the owner of stock exchanges in 7 countries: Austria, Romania, Latvia, Lithuania, Estonia, Sweden and Finland. I have previously reported about its efforts in Russia. This week we learned about two new countries being added to the list – Armenia and Ukraine.
OMX Group CEO Magnus Böcker
Following over a year of discussions, OMX Group has signed a letter of intent to acquire the Armenian Stock Exchange and the Central Depository of Armenia. “We believe that acquiring the Armenian Stock Exchange and Central Depository is an opportunity for OMX to leverage our experience from developing emerging markets in other countries. OMX will strengthen the Armenian securities market with the goal to enhance its efficiency, liquidity and visibility. Furthermore, OMX’s ambition is to use the Armenian case as a benchmark to enter other emerging capital markets,” says Magnus Böcker, CEO of OMX.
OMX also spent another year of active actions in Ukraine with the understanding that it has enough money to buy out any trading floor in the country. Experts believe that OMX will very soon acquire the Ukrainian Interbank Currency Exchange. Personally, I think that the announcement by West Siberian Resources that its Swedish Depositary Receipts have been approved for trading on the Stockholm Stock Exchange is good promotional material for the Group, and is a good promotion for the First North junior market.
Just for statistical purposes, here is the data from PricewaterhouseCoopers report "“IPO Watch Europe Survey Q1 2007”. According to PWC, OMX easily ranks in the Top-5 of firms advising on European IPOs, even in this quiet first quarter of the year.
And More Foreign Banks Moving Into Russia….
This week we have heard some statements from the officials regarding the increasing participation of foreign banks in Russia’s banking sector. Gennady Melikyan, First Deputy Chairman of the Bank of Russia, believes that by the end of 2007 foreigners will increase their share in the Russian banking sector by 5-6%. This concurs with the recent statement of Russian Finance Minister Alexey Kudrin that within the next five to seven years 35-40% of the banks in the country will be partially or fully foreign owned. The Central Bank of Russia estimates that currently this market share is about 12-13%.
In my Russia Blog post ("Russian IPOs: Week 17 of 2007 Reviewed") last week, I wrote about Toyota Bank coming to Moscow. This week there is another newcomer – the French holding company Auchan Group, which already owns a chain of supermarkets in Russia, is planning to start activities this summer to establish a bank based on its subsidiary Banque Accord Group (BAG). BAG has maintained a small office in Moscow since 2005. Initially the new bank will service the parent companies (the Auchan and Leroi Merlen chains) and after two years of regulatory period will switch to serving as a consumer bank.
In the consumer banking area, more interesting news leaked out of the Duma, where one of the deputies talked to reporters about his recent discussions in Washington D.C. with Ford Motor Company officials about their intentions to open a bank in Russia. However, local Ford spokesmen in Moscow have denied this report. Nonetheless, these negotiations might be well underway considering that Toyota and BMW have already jumped in to the Russian marketplace.
Soccer (European Football) IPOs on the Horizon
Last week saw a first-of-its-kind article published in the Russian daily sports newspaper Sports Daily that discussed the possibility of popular Russian football teams issuing IPOs. I guess this was sparked by the successful IPO of France’s top football team Olympique Lyonnais Groupe SA on the Eurolist (Euronext Paris) last April. This institutional offering was over-subscribed 6.5 times in and outside France and the French retail offering (10% of the initial offering) was covered 4.3 times. This $115.9 million IPO ($134.4 million in case of full exercise of the green shoe) raised capital to finance the construction of a new 60,000-seat stadium.
Of course European football fans may also recall the example of the Juventus Football Club, Italy's richest and most successful team, which had the biggest sports IPO this decade, raising $129 million in December 2001. Now we are contemplating IPOs for popular Russian football clubs like Spartak, that already announced IPO plans way back in 2003. Football clubs Dynamo and CSKA could be next.
This Week’s New IPO Candidates
Kamskaya Dolina, a real estate development company based in Perm, plans an IPO in 2009-2010
Mosobltrustinvest, the financing arm of the Moscow Oblast (regional) government plans an IPO for 2008.
Irkutskenergo - this Siberian power producer is considering IPO in two or three years.
You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and do not necessarily reflect the views of the FINAM Investment Company. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.
