Russia's Economy and Stock Market

As time goes by Russia is ever growning back into an economic superpower. At one point Russia was regarded as the second most powerful power in the world. Some areas do hinder this progress with an inefficient supply system, a decaying infrastructure and Soviet-era management practices. Russia still possess some of the most prized natural resources needed for a modern industrialized economy, with extensive technical expertise and a highly educated labor force. The previous Russian economy and the rest of the Soviet Union operated on a ‘centrally planned economy’ and with that came many legacies left behind. These of course will have to be dealt with as they transition into the new market economy.

1999 saw an exchange of trends in both the exports and imports with a slight increase in exports sector, while imports collapsed by 30.5%. However in 2001 there was a huge change in movement with exports declining and imports increasing. The biggest influence however has been the world prices, which have had a major effect on the performance of Russia’s exports particularly commodities such as natural gas, metals, oil and timbers which make up 80%. During this period Ferrous metals have declined by 7.5% with imports of grain and steel dropping by 61% and 11% correspondingly. A further problem has been a mixture of import duties, excise taxes and a 20% value-added tax on imported goods affecting imports of certain goods such as automobiles, aircrafts and alcoholic beverages. Another restraint specifically on the import of alcohol is the enforced import license regime. Other problems which have been created for the foreign and domestic traders and investors are the unpredictable and frequent changes in the custom regulations thus creating great uncertainty.

In 1995 a variety of regional trading floors were consolidated into one exchange now known as the Russian Trading System (RTS). It is a non-profit organization with data being distributed through a variety of financial information vendors such as Reuters who distribute world-wide. Established in Moscow and based originally on the NASDAQ’s trading and settlement software, the RTS finally went online in 1998 with its own internal system. Since 2001 the Russian stock market increased greatly to 752 percent into 2006. There are two specific Indexes that of the RTS – 2 and the RTS which are calculated using two different listed stocks. The RTS – 2 Index is calculated using the second tier stocks while the official Exchange indicator the RTS Index is calculated on a thirty-minute interval with the use of real time prices on 30 of the most liquid stocks programmed on the exchange. From here it is relayed to the RTS website, news agencies and the RTS workstations around and reviewed at three month intervals.

 



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