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Russia’s Securities Market — Challenges and Opportunities A. Potemkin MICEX, President Volume of transactions with Russian equities on Russian and foreign exchanges. Number of investors on the MICEX SE bn USD 300 225000 250 200000 200 175000 150 150000 100 125000 50 100000 0 75000 I Q 2005 II Q Foreign exchanges III Q IV Q I Q 2006 Russian exchanges II Q III Q Number of investors 2 Striving towards stock market liquidity: development of REPO market Equity Market trade volume, bn USD Bond Market trade volume, bn USD 60 160 140 Secondary market 50 REPO Secondary market REPO 120 40 100 80 30 60 20 40 10 20 0 0 I II 2004 III IV I II 2005 III IV I II 2006 III I II 2004 III IV I II 2005 III IV I II 2006 III 3 Banking sector development Lending to private and real sectors of Russian economy, bn USD 250 Private persons 21,60% Mining 2,70% Manufacturing 16,10% 193,2 200 Production and distribution of electricity, gas and water 2,00% Transport and communic ations 3,10% 137,7 150 113,5 100 Structure of credits 77,0 Other 23,10% 50 Trade 20,70% Construction 4,80% 0 2003 2004 2005 Agriculture 3,60% 2006 (sept) 4 Russian capital market: development of corporate bonds’ sector Volume of bonds issued and its ratio to the volume of fixed capital investments Structure of corporate debt (face value; 31 dec. 2005) bn USD 14 14% 12 12% 10 10% 8 8% 6 6% 4 4% 2 2% 0 0% 2001 2002 2003 2004 2005 2006 (est.) Volume of bonds issued Ratio to the volume of fixed capital investments Construction 3% Communic ations 6% Fuel industry 19% Trade 7% Transport 7% Other 28% Finance 10% Electric power 5% Food Mechanical industry engineering 4% Metallurgy 5% 5% Petrochemical 1% 5 Comparison of the MICEX’s and selected exchanges’ stock markets Exchange Market capitalization, bn USD* Volume of transactions, bn USD** Number of trades, thousand Number of equities listed Market concentration of 10 most traded domestic companies LSE (UK) 3 441.1 611.3 7 925.4 3 212 29.6% DB (Germany) 1 426.2 205.8 7 460.3 753 49.6% OMX (Northern Europe) 920.5 110.7 2 526.5 741 50.0% MICEX SE (Russia) 740.2 50.6 2 766.4 303 95% BSE (India) 693.7 15.6 28 186.8 4 785 34.0% SPSE (Brazil) 574.4 19.2 1 707.0 341 52.4% SSE (China) 492.9 54.5 33 457.3 837 32.6% WSE (Poland) 116.3 6.6 810.5 253 65.1% *30.09.2006 **September 2006 6 Market growth limitations Stock index of Oil & Gas companies and Urals price in 2006 Growth of the BRIC stock market indices in 2006 points 160% USD/brl 1600 150% 80 1500 75 1400 70 1300 65 1200 60 100% 1100 55 90% 1000 50 140% 130% 120% 110% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct MICEX Index Brazil India China Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Index Oil&Gas Urals Brent 7 Looking for new growth incentives 112 Growth of the GDP components in the 1st half of 2006 % 150 % Growth of the MICEX Index and analytical indices 140 110 130 108 120 110 106 100 104 Trade Finance Construction MICEX Index Telecom Customer Demand Energy 27-Oct 29-Sep 6-Oct 13-Oct 20-Oct 1-Sep 8-Sep 15-Sep 22-Sep 7-Jul 14-Jul 21-Jul 28-Jul 4-Aug 11-Aug 18-Aug 25-Aug GDP Manufacturing Mining 100 80 8-Jun 16-Jun 23-Jun 30-Jun 102 1-Jun 90 8 Development of IPO industry: creation of V Listing, I Listing and Innovation and growth companies project Listing requirements B Listing V Listing I Listing Innovation and growth companies project < 90% < 90% — — — — 10% — > 2 bn RUR — >1 year >3 years — — >3 mln RUR (for 6 months) — >1 mln RUR (for 2 months) or market-maker availability — Corporate Governance compliance Yes Yes Yes — List of affiliated persons disclosure Yes — Yes — — — — Investment memorandum, corporate calendar Requirements One shareholder can own Minimum offering Market value of the issue Common Preferred Period of issuer’s existence Monthly trading volume Information disclosure >60 mln RUR >25 mln RUR 100—5000 mln RUR 9 MICEX’s Index Family will give full picture of the stock market MICEX index «Mining» sector GAZP LKOH GMKN … Cap indices Sector indices Telecom 10 Large Caps Power Oil & Gas 20 Middle Caps Future prospects: 40 Small Caps • • • Consumer goods Finance Construction … 10 Development prospects Problems Solutions Companies going public (IPO) Growth of the investment base Development of the infrastructure Objective MICEX’s Index Family Market segmentation (Innovation and growth companies project) Pension system funds Insurance companies funds Stock market: Liquid Capital-intensive Competitive Creating the Central Depository Implementing CCP principle Cutting down the participants’ costs 11 Contacts www.micex.ru [email protected] (495) 234-48-11 13, B. Kislovskiy per., Moscow, 125009, Russia 12