Investors Scramble In Buyerless Market

Jean A. wanted out of the stock market. On Monday, she hit her sell point, predicted a fall and, being a short-term player, decided Russia was not where she wanted her money anymore.

Jean, a money manager for a Western firm, approached her broker at one of Moscow's leading brokerage houses and asked him to sell, fast. His answer: No.

"It just goes to show how green I am," said Jean, who asked that her last name not be used. "I thought that a person could call up her broker, say 'I want out,' and get out. This market continues to amaze me."

Jean is not alone. Bankers, brokers, advisors and investors said Friday that a sinking market, large-scale selling by Russians and a dearth of foreign investment has left some stock owners holding shares they no longer want.

"I wouldn't say it's hard to sell shares now," said Konstantin Melnikov, head of foreign relations at Rinaco-Plus. "It's impossible."

The problem started as the market fell in late September, Melnikov said. Between Sept. 26 and Oct. 7 the market dropped more than 16 percent on The Moscow Times Index, when expressed in dollar terms. In the past two days, it has fallen more than 15 points to 101.15.

The plunge was caused by foreign firms pulling out, a sinking ruble and a surge in supply of shares from workers who want to sell because they have not received wages and from brokerage firms having problems with too much debt and too little money, Melnikov said.

New foreign investors are not replacing the old. Despite reports of a multitude of funds getting ready to enter the Russian market, no one has recently made any large purchases, Melnikov said. Many funds are waiting for the market to move up again.

"It's much safer to catch the Russian market after it rises from the bottom," said one Western fund manager. "In emerging markets there is always the possibility that there will never be a bottom and the stock will just keep falling."

Banks are also quiet in this would-be seller's market. High yields from interest rates and the recently volatile hard-currency market have discouraged bankers from putting their money in stocks. In the past month, the ruble has lost nearly 30 percent of its value against the dollar, making hard currency the most profitable investment around.

One banker said he would not get back into the stock market until all other money-making outlets were exhausted. "Why bother?" he said. "There are too many other ways to make money that have less risks involved. I'm trying to be a good commercial banker and not take many risks."

The market's mini-nosedive is particularly painful for small brokerage firms, many of which have huge debts, making them unwilling to buy back stocks in an unpredictable market. Several brokers predicted a spate of bankrupt brokerages in the near future.

Not all stocks are depressed, however. Many still show strong growth, including some oil, gas and utility stocks and all cement, telecommunications and aluminum stocks, said Sergei Skatershchikov, senior partner at the Skate Press Consulting Agency.

"It's still a strong market out there, one well worth staying in," Skatershchikov said. "It's just that now investors have to be prepared to choose their stocks a little more carefully and be prepared to hold onto them a little longer."