Further, it also captures the primary
and secondary markets' scenario in Russia. When talking about the emerging countries, the term that
comes immediately into one's mind is the acronym BRIC, which
stands for Brazil, Russia, India and China. The Russian
economy enjoys its own lease of share in developing nations
and has a long way to go in order to become a global leader.
The history of Russian capital market can be traced back
to 1991, when the first resolution for the approval of joint
stock companies was passed. This can be considered the first
stage of development in Russian capital market history.
During this stage, the first joint stock company came into
existence and trading in state bonds took place. This trend
brought with it a flood of instruments with different maturity
periods.
The second stage that started in 1993 is regarded as another
milestone in the Russian capital market. During this period,
the system of private legislation was incorporated resulting
in the formation of organized and regulated securities market.
Following this sequential growth pattern, in the year 1994,
the Russian capital markets reached a stage where they were
able to influence macroeconomic pattern of the country and
the world economies to a certain extent.
Before analyzing the change in the economy, one needs to
know the outcome of financial crisis. Crisis can be an outcome
of domestic market reforms, international capital market
integration or due to any other reason. All this gives insight
that financial crisis don't result only from the inconsistencies
in the financial market. As in the case of many other countries,
the Russian economy also faced the crisis situation. The
period between 1992 and 1994 witnessed huge issues of securities,
as they were freely transferable in the form of bearer securities.
During this period, there was also a transformation of state-owned
enterprises into joint stock companies. These changes resulted
in the participation of retail investors and the establishment
of the first "Russian Institutional Investors Trusts",
thereby further increasing the participation of institutional
investors.
The period between 1993 and 1998 witnessed deficit in federal
and local budgets, giving rise to government debt. All these
happened because of the issuance of government short-term
debt securities, short-term bonds and federal loan bonds.
During 1993-1994, there was a mad rush for varied instruments
and in addition to it, there was also a flurry for establishing
commercial banks and various entities, such as non-licensed
financial companies and these institutions were popularly
called financial pyramids. All these positive events perked
up the participation of retail investors, though in the
due course there was a major setback in the capital market,
resulting in driving away investors confidence. In this
particular period, less than 5% investors were only interested
in investing in these financial instruments. Another scenario
emerged in the Russian market, whereby loan for share auctions
(1995-1996) resulted in the faster development of a powerful
section of people called oligarchs, and who eventually increased
the level of instability among the shareholders. In order
to solve these various issues, the Russian government came
up with new regulations in strengthening the capital market
regime and to standardize functioning of the market. Thus,
the crisis in Russian capital market seriously undermined
the development of the securities market, leading to the
appreciation of ruble.
|
