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. Last Updated: 07/27/2016

The Hottest Shares in Town

Plenty of Russian firms are issuing shares and selling them to the public, but this does not necessarily mean that Russia has developed its own Wall Street on the Moskva River with a computerized trading floor and hundreds of traders.


The stock market Russian-style is not really a market, but more a collection of small, private boutiques. A single brokerage usually acts as the buyer and seller for shares in each company, offering buy and sell quotations and marketing the shares to the public.


The company cooperates with its lead broker, carefully tailoring its policies to control the share price, making company information available and offering special deals to special buyers.


Konstantin Yagnukov, general director of the Aktive brokerage house, which specializes in shares in recently privatized companies, said the key to the Russian stock market was that it was nothing like the West. "It is still in an embryonic condition and the forces which operate in a normal market don't work here," he said.


He added that the market was also nervous, and responded negatively to any suggestion of a change of political direction that might reverse the move to capitalism. "For instance, after the strong showing of Zhirinovsky at the elections there was a pause, people were waiting for what will happen next," he said.


Despite these primitive and uncertain conditions, shares in some companies were in hot demand in 1993.


When asked for her list of the five most sought after shares in 1993, Zoya Larkina, head analyst for AKM, a stock market consultancy, listed Tokur-Zoloto, a gold mining venture in the Far East and four Moscow-based companies: the Olbi-Diplomat retail chain, the TsUM department store, the Krasny Oktyabr chocolate factory, and the Kosmos hotel. The last three were privatized only this year.


But Larkina said that in most cases the companies that have attracted interest on the Russian stock market have either organized major advertizing campaigns for their stock, as for example Olbi Diplomat, or they already have a high public profile, like TsUM or Krasny Oktyabr. "When you start thinking about why they were so popular, a sad picture arises," she said.


Probably the most developed stock market in Russia is for banking shares. Sergei Skatershchikov, an expert with the Skate Press, a financial information agency, said that banks shares have been traded for three years, much longer than privatized companies which are new to the stock market.


"Banks have learnt to take care of their shareholders, realizing that otherwise no one will buy their next share issue," he said. "They have learnt to pay dividends, to develop their depositary system and to publish their annual balance sheet."


At the top of its list, based on profitability, liquidity and risk, Skate-Press recommends the purely commercial Tveruniversalbank, followed by the formerly state-owned St.Petersburg Promstroibank, Mytishchensky Commercial Bank, Permkombank and the huge still partially state-owned Sberbank.


Tveruniversalbank is only three years old and its distinctive feature is that the bank has all the money in circulation Skatershchikov said. "They have to be a finger in every pot, they often take risks," he added.


The initial price of shares of the bank rose from 1,300 rubles early in summer to 2,650 rubles for Tuesday, according to Skate-Press service.


Promstroibank, on the other hand, has a high level of liquidity and does not take risks. It takes advantage of its position as a former specialized Soviet bank and enjoys a huge number of clients, Skatershchikov said.


Skatershchikov said that Promstroibank has also been careful to develop a secondary market in its shares. It tripled the price of shares simply by publishing results of its activity for the first 10 months of 1993.


A Promstroibank share cost 3,050 rubles at the start of summer. The price of shares soared to 25,000 late in December, according to Skate-Press data.


Skatershchikov estimates that both banks have developed huge shareholder lists. He said that Tveruniversalbank has as many as 3 million shareholders and Promstroibank 750,000.