Financial Pendulum – Moving to Moscow?

THIS POST WAS ORIGINALLY PUBLISHED JULY 05, 2007

Financial Pendulum – Moving to Moscow?

For the last 6 months we have heard a lot of comments pointing to the fact the Moscow is gradually moving to one of the financial centers of the world. Last week impressive information was released at the annual “Russian Securities” Forum. Just three years ago average daily trading volume on the Russian stock exchanges was about $ 600 million; in 2006 it hiked to $ 2.5 billion; and in Q1 2007 the numbers were about $ 4 billion. A few years ago the trading was evenly spread 50-50 between RTS and MICEX; now MICEX share is 70%. MICEX itself changed drastically in the last years. Here is the chart that represents its structure.

Source: MICEX
According to the exchange’s data more than 270,000 clients are connected to the trading system. MICEX trading complex processes more than 700,000 orders a day and more than 350,000 transactions a day. The number of foreign traders in MICEX increased form 17% in 2006 to current 32%. 

And here is information on the place of the exchange in the world market

 
Source: MICEX


The participants of the Forum noted that the Russian stock market infrastructure is on the verge of drastic changes – these changes have the goal to satisfy the needs of investor community. I guess, the significant statement was made by Konstantin Korishenko, Central Bank Deputy: “The first steps in the post election period would be associated with the changes of the market infrastructure”. Nkolay Egorov, MICEX Vice President, stressed the need for international integration of financial infrastructure.
And as if a visible result of these discussions Hong Kong Exchanges and Clearing Limited (HKG:0388) (HKEx) and MICEX signed a Memorandum of Understanding (MOU) on cooperation and the exchange of information on July 3rd. Some Russian experts view this event as one of the major undertakings in the sense of integration. Now, the Chinese investors have the open road to the Russian market. And the Russian companies are welcome for IPOs in China. This all is extremely interesting in the view of several facts: (a) US markets are still not attractive due to the Sarbanes-Oxley Act; (b) LSE and FSA are tightening the listing rules and some experts note fatigue of LSE of Russian companies; (c) global position of HKEx.
In general, experts point to the fact that is the Russian-Chinese financial cooperation develops in favorable way Moscow will become No.3 world financial capital (after New York and London) giving little chances for all European capitals. So, what we may expect from MICEX-HKEx union?

• Establishment of cross-border listing?
• Establishment of a flow of direct investments of Chinese investors?
• Listings of Chinese companies in Russia via RDRs?

In any way, latest news show that the wishful dreams are now turning into realty – Moscow gradually emerges as No. 3 world capital.