Is Russia a Banana Republic?

[zeytuntsi]

Re: Is Russia a Banana Republic?

Zeytuntsi, I am sorry, but you sound like you just woke up....
The WORLD stock market is going down.

Another poster who puts forward a banality that we all know while giving himself the impression that he has a solid argument.

It's about volatility levels, the diversity of the economy, the business culture...the list is long. Russia's behavior is typical of banana republics.
Those who did not expect the oil bubble to be burst need to wake up and look closely at the fragility of the Russian economy, so archaic, so dependent on oil.

[freakyfreaky]

Re: Is Russia a Banana Republic?

Just a side note. Vanity Fair is running an article by Christoper Hitchens claiming that America is a banana republic. http://www.vanityfair.com/politics/f...hitchens200810

[Armenian]

Re: Is Russia a Banana Republic?

Zeytuntsi, I am sorry, but you sound like you just woke up.... The WORLD stock market is going down. The biggest American banks declaring bankruptcy. The Morgan Stanley was even sold to Communist China. The biggest US banks Washington Mutual and Wachovia do not exist anymore because they ran out of money.... And one more point (in case you didn't know) - the stock market ALWAYS goes up and down.

NP, don't mind this character. I have warned you about this before in my Russian Thread. Zeytuntsi's sole purpose here is to oppose me. Most probably, the character in question is the same person as the infamous Siamanto that has caused many problems here before due to its psychotic obsessions towards me. So, don't worry, in final analysis, this is not about Russia - it's about me.

[zeytuntsi]

Re: Is Russia a Banana Republic?

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3264822/Russia-feels-chill-winds-of-the-global-downturn.html

Russia feels chill winds of the global downturn

If America and the rest of the West is feeling a chill right now, then Russia is positively freezing.


By James Quinn
Last Updated: 6:02AM GMT 27 Oct 2008


On Friday, both Russia’s stock exchanges saw dramatic falls – with MICEX, the leading exchange controlling 99pc of volume in Russian shares, bonds and commodities, falling 14.2pc after being suspended twice and closing early. Moreover, MICEX chose to suspend all trading today , to allow investors time to digest what appears to be the new economic order, before reopening tomorrow.

Russia is not alone. Having ridden the crest of the bullish wave to the middle of 2007 as one of the BRIC nations – Brazil, Russia, India and China – it is paying the price of being an emerging economy in a downturn.

Just as Argentina has decided to nationalise pensions to tackle its own financial crisis, and Iceland has been forced to go cap in hand to the International Monetary Fund, so Russia has its own unique problems.

The MICEX has now fallen 74pc from its peak in May 2008 – compared to the S&P 500 which is down 40.3pc year-to-date, and the FTSE 100, which is now 41pc lower than its peak last autumn.

One of the main reasons for this fall is because of the way the country’s investment market is structured. In the months and years running up to the top of the bull market, Moscow became a home for what MICEX chief executive Alexei Rybnikov unashamedly calls “hot money”.

“The specific Russian problem in this context is because of the general deficit of long-term buy-and-hold investors. When we became caught in this situation, the leveraged hot money was all gone very fast and we had no domestic investors to support the falling market,” he says.

Rybnikov, who has run MICEX since its formation in November 2003, blames the rapid falls on the degree of hedge funds and other leveraged investors who deserted the market almost as quickly as they entered.

As Rybnikov points out, one reason foreign investors were able to exert such power on Russian markets was because of the lack of a domestic shareholder base. The number of Russians who trade in any form of securities is approximately 1m-1.5m, up to 1pc of the country’s 140m population. In the US, this figure is 50pc of households.

In addition, the investment industry is somewhat scant, with entire assets in Russian pension funds, insurance companies running into just dozens of billions of dollars – with very few domestic long-term funds. Impressive, until you consider that MICEX trades $17bn worth of equities, bonds, derivatives and currencies every day.

“The development of the domestic investor base was something talked about in the past several years,” explains the MICEX chief. “But that growth did not happen [for political reasons] and as a result all of the negative features of the Russian capital markets came into play.”

Those negative features are now affecting not just the country’s capital markets, but the economy as a whole.

On Friday, the cost of insuring Russian governments bonds against defaults rocketed. Perhaps even more worrying was credit rating agency Standard & Poor’s issuing a downgrade notice on those bonds, warning that $200bn of state rescue packages designed to ease the crisis could begin to erode the country’s finances.

Unsurprisingly, perhaps, the Russian economy looks to be in somewhat of a precarious situation. The entire Russian oil industry is now worth less than Brazilian oil giant Petrobras, and some banks are now trading at less than half book value.

“The biggest problem in the Russian economy is a general lack of trust. People are too much afraid to lend money,” says Rybnikov. That said, he clearly believes the structure of Russia’s economy is sound, with a boom in many industries, as seen in the growth of its consumer and production markets.

“Now, we’re looking at events through a darkened piece of glass. It’s definitely worse than was thought by many, but I don’t think it’s catastrophic.”

Part of the reason for Friday’s stock market fall in Russia was because the government released figures showing that gross domestic product slowed to 0.4pc.

According to Peterson Institute economist Anders Aslund, writing in the Moscow Times, the problems in the economy are three-fold.

First, the banking system has frozen, which led the country’s central bank chairman to say recently he expects 50-70 Russian banks to collapse. Second, as a direct result of the frozen lending markets, Moscow’s booming real estate market is slowing dramatically. Third, commodities, around 25pc of Russia’s GDP, are falling in price, hitting the country’s fiscal firepower.

Yes, argues Aslund, Russia traditionally had huge reserves, but with $70bn of those reserves having already left the country, the question remains how strong the Russian economy actually is.

That question continues to weigh heavily on MICEX, whose downward volatility is hurting Moscow’s reputation as a place to do business.

Rybnikov is hopeful for the future not only of MICEX, but for Russia’s capital markets as a whole, however.

“I think the crisis put into focus the problems in Russia; the lack of pension reform, lack of structural reform. It’s very clear that we do need pension funds for long-term money,” he argues, looking on the bright side of a situation which, right now, seems somewhat bleak.

[zeytuntsi]

Re: Is Russia a Banana Republic?

NP, don't mind this character. I have warned you about this before in my Russian Thread. Zeytuntsi's sole purpose here is to oppose me. Most probably, the character in question is the same person as the infamous Siamanto that has caused many problems here before due to its psychotic obsessions towards me. So, don't worry, in final analysis, this is not about Russia - it's about me.

I see that spending two months in a psychiatric hospital last summer when you pretended to be in Armenia did not help your paranoia and mental issues.
I will pray for your soul.

[zeytuntsi]

Re: Is Russia a Banana Republic?

http://www.baltimoresun.com/news/nation/bal-te.russia26oct26,0,5424651.story

Russians told all is well as nation's economy sinks
McClatchy-Tribune
October 26, 2008

MOSCOW - Oil prices have plunged from a high this year of $147 a barrel into the $70s, dangerously close to the minimum needed to sustain Russia's national budget. Russian stock markets have lost more than 60 percent of their value since May. The rough times have forced the recent sales of five banks, at least three of them for symbolic prices of less than $200.

For television viewers in Moscow, though, there has been little indication that things are going awry. In recent weeks, newscasts showed Prime Minister Vladimir V. Putin petting a baby tiger he got for his birthday and watching his black Labrador prance around with a new GPS device on its collar.

As for news about the plunging Russian economy on the main TV stations, all controlled or heavily influenced by the Kremlin? Almost nothing.

The disconnect between problems with the financial system here and the message the Kremlin is pushing makes clear a key facet of Russian leadership: a Soviet-style approach of a strong central power that criticizes the West while telling its citizenry little of importance. It's made reading the financial tea leaves difficult for experts and almost impossible for ordinary Russians.


"The Russian population is financially illiterate," said Nikolai Berzon, a professor at the Russian State University's Higher School of Economics.

An editorial last week in the business newspaper Vedomosti noted a "central bifurcation" between what top government officials are saying to the business community about "an unavoidable decrease in the rate of economic growth" and the reassuring words of Putin and President Dmitry Medvedev, meant for the masses on TV.

Even among Russian economists and political figures, there is disagreement about what the government is up to as it implements a planned bailout package of about $200 billion.

Russian officials have said repeatedly that they're looking to stabilize the stock market, protect the ruble and rescue banks in financial distress. But Alexander Murychev, vice president of the Russian Union of Industrialists and Entrepreneurs, said the government has paid more attention to larger banks while letting many smaller ones languish.

"If there are fewer banks, it's easier to control them." Murychev suggested.

Is he saying that's the government's aim?

"I don't know," he said. "But judging from what's happening, it seems like that's what they want."

Andrei A. Piontkovsky, a Russian analyst and a visiting fellow at the conservative Hudson Institute in Washington, said the Kremlin is bailing out those close to the ruling elite. "It's a redistribution of money and wealth to Putin's cronies," Piontkovsky said.

Mikhail Kasyanov, the Russian prime minister from 2000 to 2004 and now an opposition figure, said that the approximately $6.7 billion the government is planning to invest in the stock market isn't to shore up the economy, but to rescue companies that the government or its allies own.

At the Grand Havana Room, a private club in central Moscow for the wealthy and well-connected, "everybody is shell-shocked," said Bob Van Ronkel, the director of business development.

The oil boom of the past several years had convinced many Russian business leaders that their country would not face a downturn, even if Western economies began to slide.

"Everybody told me it couldn't happen because of the demand in Russia, because of the oil prices, because of the money coming in," Ronkel said. "What everybody was saying was wrong."

[zeytuntsi]

Re: Is Russia a Banana Republic?

Already 70% down

http://www.reuters.com/article/marketsNews/idUSLB30091420081111?sp=true

Oil, rouble, Uralkali pressure Russian assets
Tue Nov 11, 2008 12:37pm EST
(Recasts and updates with details of trading suspension)

By Polina Vorobieva and Melissa Akin

MOSCOW, Nov 11 (Reuters) - Russia's main stock exchange slammed shut the doors to the trading floor to halt plunging prices on Tuesday, with Russian assets under pressure as the central bank ceded ground on the rouble and oil prices fell.

Potash miner Uralkali (URKA.MM: Quote, Profile, Research, Stock Buzz) also extended losses by another 20 percent as investors feared the company, facing a renewed government probe of a 2006 mine flood, was the subject of an asset grab.

With its main index down 12.64 percent, the MICEX exchange suspended trade limit-down for a day, unless the regulator orders it to restart before the opening bell on Nov. 13.

The central bank let the rouble decline to 30.79 against its euro-dollar basket in early trade on Tuesday before returning it to around 30.70, around 30 kopecks below its previous support level.

The bank later confirmed it had expanded the band by 30 kopecks.

Currency dealers estimated the central bank spent $7 billion defending the rouble on Tuesday even at its new lower level.

"The biggest question now is what happens next: whether this is the first of many moves or a standalone measure," Renaissance Capital economist Alexei Moiseev said.

"We believe today's move achieves nothing and that the central bank should either have held the basket or let it go completely. A one percent move will not stop speculation, nor will it help the economy adjust to the much worsened terms of trade."

Underlining concerns that the central bank's $200 billion bailout package for the financial sector and the broader Russian economy could fuel capital flight and inflation, the government raised key interest rates by 1 point effective on Wednesday.

The exception was the currency swap rate, which rose by 2 points. The central bank has sought to limit swap transactions to prevent speculation against the rouble.

Share and bond prices also declined as investors tried to gauge the central bank's next move on the currency and its impact on rouble assets.

With oil, Russia's key export and economic driver, down more than $3.50 on the New York Mercantile Exchange CLc1, pressure mounted on Russian asset prices. The benchmark RTS index .IRTS fell 10.67 percent to 725.89, its lowest level yet this month.

Russia's portion of the EMBI+ emerging market bond index expanded by 23 points to stand at 512 over U.S. Treasuries.

Moscow's MICEX and RTS exchanges suspended share trading limit down for one hour in early trade, though several blue chips were periodically suspended limit down after falling more than 10 percent from the previous day's close.

State savings bank Sberbank (SBER03.MM: Quote, Profile, Research, Stock Buzz), mining giant Norilsk Nickel (GMKN.MM: Quote, Profile, Research, Stock Buzz) and state-controlled oil company Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) were all suspended limit down for one hour during the day after declines of 10 percent or more.

Uralkali, which lost 62 percent in London (URKAq.L: Quote, Profile, Research, Stock Buzz) on Monday after the company said a government probe into a mine accident could threaten its existence, lost another 23 percent in London and led losses on the MICEX (URKA.MM: Quote, Profile, Research, Stock Buzz) with a 34.81 percent decline.

"This is an opportunistic move to gain a foothold in that industry or take some assets," Uralsib strategist Chris Weafer said.

"Someone likely wants the company for themselves, goes the whisper," said one Moscow-based hedge fund manager who declined to be named.

The loss put the potash producer -- a darling of investors for a core profit margin that exceeded 40 percent as prices for its product hit record highs this year -- down among the ranks of the developers, the Russian shares hardest hit in the crisis.

Uralkali is now down 88 percent on the MICEX from its June 18 all-time high.

"Almost any second tier or smaller stock you look at is down 70-90 percent from highs. It's Armageddon," the fund manager said. (Reporting by Polina Vorobieva; editing by Simon Jessop)


© Thomson Reuters 2008. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

[zeytuntsi]

Re: Is Russia a Banana Republic?

http://www.marketwatch.com/news/story/russian-equities-fall-sharply-ruble/story.aspx?guid=%7BB7D21F39-0A06-459A-904A-2B83491C9F1A%7D&dist=msr_1

EMERGING MARKETS REPORT
Russian equities tumble, as ruble drops 1% By Polya Lesova, MarketWatch
Last update: 4:33 p.m. EST Nov. 11, 2008

NEW YORK (MarketWatch) -- Equities in Moscow fell sharply Tuesday, forcing trading suspensions on the local stock exchanges, as the Russian central bank allowed the ruble to weaken about 1% against its dual currency basket.
Russia, a major exporter of oil and other commodities, is currently battling the worst financial turmoil since its 1998 crisis. Local equity prices have tumbled 70% and investors have pulled billions of dollars out of the country on concerns over growing domestic political risks as well as tumbling oil prices.

In Moscow, the dollar-denominated RTS stock index ended down 10.3% on Tuesday after the exchange halted trading for one hour to stem the slide in prices.

The RTS stock index has tumbled 68% this year, making it the worst performer among major global emerging market indexes.

The ruble-denominated Micex stock index tumbled 12.6%, leading the Micex exchange to halt trading as well. A broad retreat in commodity prices weighed on Russian oil and gas stocks, which dominate the local market. The RTS Oil and Gas index dropped 11%.


Ruble falls 1%
Russia's central bank allowed Tuesday the ruble to weaken about 1% against its dual currency basket for the first time since September, analysts said. The ruble's dual currency basket is comprised of 45% euros and 55% U.S. dollars.
The ruble fell to 30.72 from 30.42, a level at which the central bank had typically defended the ruble.


The timing of the move came as a surprise to most analysts and followed comments Monday from the chairman of Russia's central bank, Sergei Ignatiev.
"I do not rule out more flexibility in the ruble exchange rate with some tendency towards weakening of the ruble in the current conditions," Ignatiev said Monday, according to media reports.

Given current oil prices, Russia's current account is likely to post a slight deficit, a big change from the surplus of over 10% of GDP in the first quarter of this year, said Rory MacFarquhar, a strategist at Goldman Sachs Economic Research, in a note. Russia needs to make $180 billion in private sector external debt payments by the end of 2009.

"The policy of holding the ruble within a band against the basket, which was originally designed to slow the appreciation of the currency, has rapidly mutated into a defense of an overvalued exchange rate with the decline in oil prices and the global sudden stop in capital flows," he said.

MacFarquhar noted that the central bank is "very reluctant to allow large-step devaluation for fear that it would trigger a wave of capital flight and provoke broader concerns among the population about the country's economic stability."

That strategy is "risky," because the market and the population are likely to put considerable pressure on the ruble in anticipation of further weakness, he said.

Lars Rasmussen, an analyst at Danske Bank, said that he expects market participants to increase bets on a weaker ruble, putting more pressure on the Russian currency.

"The ultimate question is just what it [the central bank] will do if the market decides to exit ruble positions at an even faster pace than has been witnessed recently," Rasmussen said in a note.

Russia's international reserves have dropped by $112 billion to stand at about $485 billion since their peak in early August.
The central bank "will have to tread very carefully going forward if it is to avoid creating panic in the market," Rasmussen said.

Economists at ING Bank said that a key variable in the outlook for the ruble is the oil price. If oil prices fall below $50 a barrel, there is a much higher risk of a more significant devaluation.
"Our base case is that the authorities can handle anything thrown at them, and can hold weaker ruble levels, but we remain very concerned about the local response," said the ING economists. "A run on ruble deposits and their conversion into foreign exchange could sharply weaken central bank reserves and add to panic."

In New York trading, the Market Vectors Russia ETF (RSX) , which tracks the Russian stock market, tumbled 13.3%.
Russian shares listed in New York and London also posted steep losses. In New York, shares of Vimpel Communications (VIP) fell 27% and Mobile TeleSystems (MBT) dropped 28%.

In London, shares of oil and gas giant Gazprom (UK:OGZD) tumbled 16% and those of Rosneft (UK:ROSN) dropped 26%. Shares of potash producer Uralkali (UK:URKA) fell 23%.

Polya Lesova is a New York-based reporter for MarketWatch

[zeytuntsi]

Re: Is Russia a Banana Republic?

It is getting worse by the day.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aGM.h_O4I3Bw&refer=home

Russian Industrial Production Shrinks Most Since 1998 (Update2)

By Alex Nicholson

Dec. 16 (Bloomberg) -- Russian industrial production shrank the most since the economic collapse in 1998 as the global slowdown reduced demand in November for steel, pipes and fertilizers, pushing the nation to the brink of recession.

Output contracted 8.7 percent after growing 0.6 percent in October, the Moscow-based Federal Statistics Service said today. The result was about 4 percentage points below the lowest forecast in a Bloomberg survey. Production shrank for the first time since a new methodology was introduced in 2003 and showed the biggest decline since industry tumbled in the wake of the 1998 crisis, when the government defaulted on $40 billion in debt. Overdue wages leapt 93 percent in the month, adding to concerns that social discontent may rise, the service said in a separate statement.

Russia is not in recession “yet” and the economy will grow by as much as 3 percent next year, Finance Minister Alexei Kudrin said yesterday. Barclay’s Capital said on Dec. 10 that the economy will sink into recession next year, as eight years of growth averaging above 7 percent comes to a halt.

“November is the first month where we see the real impact of the crisis on the economy,” said Vladimir Tikhomirov, chief economist at UralSib Financial Corp. in Moscow. “So far, it was mostly in the financial sector, and the real economy still managed to retain positive growth. November is the first month where we see a change in the trend.”

Interfax news service reported the same numbers yesterday, citing an unidentified government official.

Crisis Hits

The global financial crisis has shattered the economic growth outlook for emerging markets and global trade will go into reverse in 2009 for the first time in 25 years, the World Bank predicted on Dec. 9. The industry contraction was almost five times sharper than the median forecast of 12 economists surveyed by Bloomberg for a drop of 1.8 percent. Production fell a monthly 10.8 percent compared with growth of 2.8 percent in the previous month.

“In conditions of a global economic crisis, this systemic contraction in demand will, of course, affect Russia,” Kudrin said yesterday.

There were two fewer working days in the month compared with a year ago, while unusually warm weather reduced electricity output, contributing to the poor numbers, Tikhomirov said.

‘Comparing Numbers’

“‘We should also keep in mind that we are comparing the numbers to one of the highest output records in Russia’s post- Soviet history,” he said.

Russia’s benchmark Micex Index fell 0.50 percent at 4:58 p.m. to 639.07.

The ruble, which is managed by policy makers against a basket of dollars and euros, rose 0.05 percent to 27.6065 per dollar by 4:20 p.m. in Moscow, from 27.6212 yesterday. Against the euro, the ruble fell 0.04 percent to 37.8258, from 37.8093 yesterday, leaving it unchanged against the basket.

The central bank pared back its defense of the national currency for the second time in a week yesterday, in a bid to slow the drain on Russia’s reserves, which have fallen by $161 billion as the government props up the ruble. Foreign and domestic investors have withdrawn about $211 billion from the country since August, BNP Paribas SA estimates, as crude oil has tumbled about 70 percent in the period.

The “deterioration” in industry “will continue throughout the first half of next year, until confidence in the local currency has returned and internal capital flight has stopped,” Alfa Bank economist Natalia Orlova wrote in a research note today.

‘Systemic Contraction’

Manufacturing fell an annual 10.3 percent compared with growth of 0.3 percent in October, as steel-pipe production dropped an annual 36.9 percent and coking coal output fell 38.7 percent, the service said. Truck and car production dropped 58.1 percent and 7.2 percent respectively.

OAO Severstal, Russia’s largest steelmaker, cut output by half and plans to reduce spending 20 percent in 2009 as Japan and Europe enter a recession and the U.S. suffers its worst slump since the Great Depression. The steelmaker, the fourth-largest producer in the U.S., will delay $8 billion of investments planned for 2009 to 2011.

Ford Motor Co. said on Dec. 8 it will close its factory near St. Petersburg between Dec. 24 and Jan. 21 to reduce output because of falling demand. Ford, the first international carmaker to produce in Russia since the fall of the Soviet Union in 1991, will pay affected workers two-thirds of their salaries, the company said.

Fertilizer production fell by an annual 51.6 percent as OAO Uralkali, Russia’s second-largest potash producer, reduced output by half and lowered its forecast for fertilizer sales in the fourth quarter.

Unemployment will rise to between 10 percent and 11 percent next year, from the current 6.1 percent, according to VTB Capital.

To contact the reporter on this story: Alex Nicholson in Moscow at [email protected].
Last Updated: December 16, 2008 10:45 EST

[zeytuntsi]

Re: Is Russia a Banana Republic?

Going bankrupt?

http://www.businessday.co.za/articles/world.aspx?ID=BD4A906388

Posted to the web on: 17 December 2008
Russia struggling to pay wages
Alex Nicholson

Bloomberg

MOSCOW — Russian wage arrears nearly doubled last month as manufacturing shrank the most since the 1998 economic collapse and companies in the country’s industrial heartland struggled to find cash to pay their employees.

Total unpaid wages jumped 93% to 7,8-billion roubles ($281m) on December 1, after rising 33% in October, the Federal Statistics Service said yesterday .

Delayed salary payments in the Chelyabinsk region in the Ural Mountains jumped 35 times to 156,1-million roubles, the service said. The region is home to steel and coal producer Mechel, Magnitogorsk Iron & Steel , billionaire Andrei Komarov’s ChTPZ Group and Russian Copper , the nation’s third-largest producer of the metal.

Signs are emerging that social discontent is on the rise as Russia’s economy, built on energy and commodities, slows faster than other emerging markets such as China and India. About 39% of Russians expressed growing dissatisfaction with the government in a poll released yesterday by the Public Opinion Foundation. In some regions, the level of discontent is more than 50% .

Industrial output contracted an annual 8,7% last month after growing 0,6% in the previous month, the Federal Statistics Service said .

The result was about four percentage points below the lowest forecast in a Bloomberg survey and the biggest contraction since the 1998 economic collapse, economists said.