RUSSIAN MARKETS BULLISH.

Russia’s financial markets reacted enthusiastically to the results of the first round of the presidential election. Corporate stocks, whose prices are driven by Western investors, responded sharply. On June 17, the day after the election, the Moscow Times index of 50 leading shares rose 11.6 percent. Government bonds, which are driven by domestic investors, also moved up, but more warily. By mid-week, three-month Treasury bills were showing annual yields of 130 percent — astronomic by Western standards, but well down from the previous week — after T-bill prices had risen.

On the foreign exchange market, the prospect of a Yeltsin first-round victory may already have been discounted before the election; the ruble weakened slightly on the first day of trading after the election, falling from 5046 to 5057 to the US dollar on the Moscow exchange. By June 19, however, the exchange rate was back to the pre-election level.

Even the dollar-denominated MinFin bonds, which had been in trouble a week before the election, strengthened by 6.5 percent over the first two post-election trading days. Earlier, trading in $30 million of the Ministry of Finance-issued bonds (a tiny part of the $8 billion outstanding) was suspended because it was found they had been stolen. (Financial Times, June 14)

Clearly, markets expected that a renewal of Yeltsin’s presidency would attract new investment to the privatized sector, raise share values, and herald higher prices in the government bond market. (Finansovye izvestiya, Segodnya, June 20)

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