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. Last Updated: 07/27/2016

Boom in IPOs Risking Inflation

A boom in public share offerings is fraught with inflationary risks, but poses no threat to the stability of the currency market, a senior Central Bank official said Friday.

"An increase in IPOs, despite all its positive aspects, is still a big problem and headache for monetary policy," Konstantin Korishchenko, Central Bank deputy chairman, said at an investment conference.

"This problem [capital inflows] is fraught with inflationary risks," he added.

Firms raised over $17 billion by listing their shares on domestic and foreign bourses in 2006, according to a report by consultants PBN. Investment bankers forecast that listings may raise a record $30 billion this year.

The next major IPO will be by state-owned VTB, the No. 2 bank. Analysts working in the IPO syndicate estimate that the deal could raise $8 billion, a source familiar with the deal said Friday. Most of that cash will come from nonresidents.

Korishchenko noted that Russian shares were in huge demand from global investors who actively sell foreign currencies on the interbank market and buy rubles to fund purchases of them.

Korishchenko, responsible for the bank's open market operations, said, however, that he was not concerned over Thursday's record ruble-dollar trade volumes, as he was confident the forex market could handle such risks.

Volumes on the country's currency market hit a record $9 billion on Thursday, and the Moscow Interbank Currency Exchange suspended trading for around 30 minutes due to a technical glitch.

Traders said the heavy dollar selling was possibly linked to auctions of assets in bankrupt oil firm Yukos that would continue into May, potentially leading to billions of dollars more being put through the currency market.

The Central Bank, which runs a managed float of the ruble, is typically the dollar buyer of last resort and running its ruble printing presses flat out to curb excessive appreciation that would hurt national economic competitiveness.

Its foreign reserves, already the world's third largest, rose by $7.6 billion in the latest week to $346.6 billion.

Growth in the money supply is running at over 50 percent, making it hard to keep inflation down.

"We expect more upward pressure on the ruble over the next few months, as capital inflows are likely to remain strong, partly due to more major transactions in the pipeline," Goldman Sachs said in a daily commentary.

Korishchenko did not rule out that among possible reasons behind the Thursday's increase in ruble-dollar trade was investors' wish to "acquire assets." He did not elaborate.