| In the same way that 1996 was the year of the fixed income markets, 1997 will be the year of the equity markets. While we are witnessing domestic fund transfers from the fixed income market to the equity markets, the primary driver of the equity markets is the increased weighting and re-allocation of funds being applied to Russia by Western emerging market investors. While the GKO/OFZ market and the equity market are each capitalized at about $40 billion, the daily volume on the GKO/OFZ market in January 1997 was $800 million, and the volume on the RTS for the whole of January - a record month - was $900 million. Despite the revaluation already witnessed in the last 12 months in the equity markets, there is still enormous value to be found. Demand follows liquidity, and the market is developing both depth and breadth. Settlement systems still require attention, in particular the need to settle on a delivery against payment basis.This would reduce the time, cost and risks currently associated with settlement. An ever growing universe of potential equity investors is rapidly awakening to the attractions of investing in Russia. |