Actuality August, 29, 2007

The world market micro crises are becoming more and more frequent; and this can lead to price rising of financial resources in the world. Investors can reconsider their strategies, and start to demand a greater payment for the risk connected with global instability. First of all, it will influence developing markets. For Russia, considering the activity of Russian corporations borrowings in the west, resources price rising can be rather critical. How dangerous can such risks be?

Crises, certainly, will be – it’s normal. In a changing world they hardly can be less inevitable than death and taxes; the other matter, perhaps, is that it’s harder to predict them; it is also almost impossible to foresee its results and consequences. Of course there are some chances to build up early crises indicators with more or less exactness, but they will give only probabilistic forecasting, not unconditional prediction. It’s the first point.
Secondly, there is a difference between the two crises and each of them can influence the same markets in different ways. For example, recent fluctuations of the world financial markets were provoked by crisis of debts of mortgage lending in the USA; and at the same time the same markets could react to fluctuations of the oil prices; and the response mechanism would be another.
Thirdly, the nature of crisis can be different too – as from the economic reasons up to political decisions, something like, for example, the project of USA invasion of Iran or even the convulsion of nature like hurricane or flood, and there you have a new crisis!

But whatever a crisis was, probably, investors will turn away from developing markets, unbalance will happen in the world currency market, possibly, the growth of dollar will begin, and, probably, there will be leaps at the raw material markets, foremost, at the market of oil and oil products.

An investor is an economically dependent man, in the sense that he, naturally, is doomed to react to the changes of terms of economic activity. An investor is also a rational man, and will react to the explosion wherein it blew up, instead of wherein it is lighter: if a crisis does not affect developing markets, an investor will not go away from them.
And another pair of shoes is that nowadays crises became global. About 10 years ago Russia, probably, would be skirted around by a crisis which was caused in the USA by the mortgage crediting. Now it is impossible, because markets are much more closely connected with the world one, and not through one or two companies, but through the investors’ money.
Naturally, if they can in one second simply pressing one key on the key-board transfer the billions of dollars from Moscow to London, Tokyo and New York, these geographically distant markets are de facto extremely close to each other.
From a number the Russian markets to the number of comparatively vulnerable the financial ones belong, just because of the fact that considerable part of the means invested in them circulate also at the western markets, yielding to only one New York stock exchange in total capitalization in more than 30 times, certainly, we depend on world tendencies. It may not be true, by the way that this dependence doesn’t do us any favors, for example, that mortgage crisis in the USA can result in the decline of trust of investors to the American mortgages, and they can transfer part of money to the Russian markets.
The small sizes of market can be a stabilizing factor: so, mortgage crisis in the USA was caused by the same reasons that effected Moscow. However, artificial and the planned limitation of price growth rates for the Moscow real estate prevented further growth of bubble, and with it danger of suddenly sharp deflation. Investors inlaying a lot of money in the Moscow real estate didn’t only rightfully legitimately were concerned about the explosion of this bubble but also had a possibility to control the price rises – just due to comparatively small size of market.

Can something, what is going on in the world markets, lead to the crisis of non-payments under consumer credits in Russia?

It can, but hardly in a short-term prospect. For example, if oil prices recede (what is improbable) now, it, obviously, will result in the decline of profits of those, who take these credits; however, to have this process get the end and was «felt» the whole Russian banking system, a few months will be required. In the case of such crisis different variants are possible, however, by all appearances, reasonable strategy in this case would consist of smoothing out of pressure on a market, for example due to the purpose selective subsidies of the Central Bank, which in any case will have time to develop the policy of crisis management, and means for such interventions.

Do not users worry about the exchange rate?

The rates of exchange also worry, but this process is smoother, more «spread». Here a market is steady enough to stabilize on its own. For the last four years dollar went down almost for 20% in Russia, but still a considerable part of population keeps their savings in dollars. And what would happen, if the same collapse happened for one week? Time in finances too is the best doctor, and the slower are the structural changes, the less probable are large shocks.

Akexei Belyanin was replying.