Russian ADRs Outperforming BRICs
Director of Equity Financing, FINAM Investment Company, Moscow
A few days ago the Moscow Interbank Exchange (MICEX) announced its operational results for the first quarter of 2007 that showed substantial growth on the year to year basis. I am taking the liberty of reproducing excerpts from this report with some illustrations. The graphics in the extended post are selected from "Investing in Russian Stocks and Bonds", a guide published in the June 2007 issue of Institutional Investor magazine by the MICEX Group (click here to download the full report in PDF format - you can also find a link to this report in the righthand column of Russia Blog).
Click on the extended post to read more about the phenominal growth of Russia's largest stock market.
Beating the BRICs - American Deposit Receipts (ADRs) from Russian companies have recently outperformed those from Brazilian, Indian, and Chinese corporations (Source: MICEX)
The MICEX Group integrates the trading and the settlement systems on a single platform and plays the main role in the exchange infrastructure of Russian capital markets. The MICEX Group includes the MICEX, the MICEX Stock Exchange, the National Mercantile Exchange, the MICEX Settlement House, the National Depository Center, the National Clearing Center, regional exchanges and some other organizations. It provides trading, settlement, clearing and depository services to roughly 1700 leading Russian banks and brokerages located in Moscow and several other large financial and industrial centers of Russia.
In the first half of 2007 the total volume of exchange-based trading on all markets of the MICEX Group amounted to 37.14 trillion rubles ($1.43 trillion), 1.7 times more than in the same period of 2006. The average daily volume of exchange-based trades on the MICEX Group’s markets grew to 312 billion rubles (about $12 billion).
Map of the MICEX and its affiliated regional exchanges in Russia
In 2006 the exchange-based corporate securities market demonstrated the largest volume of operations and the fastest growth. Its share of the total exchange-based turnover for the MICEX Group grew by 48% (in 2006 by 37%). In H1 2007 the total volume of transactions in non-government securities, including stocks, bonds, shares of investment funds and repos, reached 17.84 trillion rubles ($685 billion), 2.2 times more than in the same period of 2006. At present the MICEX Stock Exchange organizes trading in 1,089 securities from 662 issuers. Out of these, 295 securities of 181 issuers are listed.
Since the beginning of 2007, the number of securities traded on the MICEX SE has grown by 12.6%, while the number of issuers whose securities are admitted to exchange-based trading has grown by 12.8%.
The MICEX Stock Exchange plays an important role in placing IPOs from Russian issuers. In the first six months of 2007, eight companies launched their IPOs using the services of the MICEX SE, including Sberbank (RTS:SBER), Vneshtorbank (RTD:VTBR) and other issuers. Altogether, these popular IPOs” attracted 565 billion RUR ($21.8 billion). This places the MICEX second in the world after the London Stock Exchange (over $26 billion) in IPOs on the year. Today there are 616 entities participating in trading; 503 have been admitted to trading, including 288 credit institutions and 215 non-credit institutions. They serve over 460,000 registered clients, including 425,000 individual investors (as of January 1, 2007, this number was only 231,000).
MICEX participants by type - note the increase in individual and non-resident private investors
In H1 2007 the volume of stock trades amounted to 12.58 trillion RUR ($482.6 billion), 2 times more than in the same period of 2006. On June 30, 2007, the capitalization of the market for shares traded on the MICEX reached 24.86 trillion RUR ($963.6 billion), 1.5 times more than in the previous year.
The MICEX Group is implementing a program to establish regional exchange centers and provide settlement services for all of the Russian regional exchanges. In the first six months of 2007 APICEX and RCSEX changed their names to“MICEX - Far East” and “MICEX – South”. The MICEX is the main shareholder in these exchanges. Regional affiliate companies of the MICEX must change their business model from that of a regional currency exchanges representing the MICEX in certain areas to full-fledged front offices of the MICEX Group in their particular region. Regional exchange centers must emphasize interaction with regional issuers, traders and investors.
Thus, no matter what the Western media may say about the investment climate in Russia, the evidence supports the idea that the financial pendulum of Europe is moving to Moscow.
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 are reproduced here solely for educational purposes. 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.
