Nobody plans to support the national stock market out of the stabilization fund, Vladimir Putin stated.

Nobody plans to support the national stock market out of the stabilization fund, Vladimir Putin stated.

It is planned to make amendments to the 2007 federal budget, said Tatiana Golikova, the Deputy Finance Minister. Thanks to these amendments, the funds from the stabilization fund may be channeled for launching the Bank for Development and some other corporations. RBC daily's source in the government says the Bank for Development will receive about 350 billion rubles from the stabilization fund already this year.

According to the law, the Bank for Development is entitled to operate on the securities market not only with the view of implementing investment projects, but also for the purpose of ensuring its own liquidity and risk management. It was planned at first that the Bank for Development would cover expenses arisen from its day-to-day activities by means of profits from the implementation of investment projects. However, all projects of the bank are long-term. So, any profit in the first few years is unlikely. In order to prevent a waste of the authorized capital, the amendments were approved to allow the corporation place a part of funds on the stock market.

It is planned that the most part of funds to be channeled by the Bank for Development on the securities market will be fixed in annual memorandums of the bank approved by the government. It will be up to the bank's board to make decisions on additional placements with the view of supporting the current liquidity of the Bank for Development. VEB used as a basis of the Bank for Development denied comment.

It is quite possible that the management of the Bank for Development will give support to priority sectors of industry in this way. Economists disapprove the idea. For example, Trust economist Evgeny Nadorshin is sure that it would be wrong to support priority sectors of industry by the resources of the Pension Fund, because "blue chips" are a high-risk instrument. On the other hand, the Chief Economist of Troika Dialog Evgeny Gavrilenkov does not consider it a problem that the Bank for Development will place a part of free funds on the stock market.

However, a sudden interest of the President in investing of public funds is explained simply. After approving all statutory acts and appropriating funds, the Bank for Development will start operating not earlier than in spring 2008. Probably, Vladimir Putin thinks of taking the helm of the most powerful state-owned corporation after the Presidential election. However, political scientists are sure that the Bank for Development is a too petty thing for Vladimir Putin. The Director of the Center for Political conditions Konstantin Simonov says Putin is closer to the Fuel and Energy Complex. According to him, after the election, the President will tend to the source of money and not to development institutions being filled up by means of selling hydrocarbons.  "The President will hardly go to the financial sector," says Alexei Makarkin, the Deputy General Director of the Center for Political Technologies. According to him, Putin's statements may be regarded as a reaction to objective processes.

The Presidential election forthcoming, the President makes concessions to the Establishment unanimously confident of the necessity to spend instead of accumulating public funds. He actually is in opposition to the Finance Minister whom he has supported unconditionally until recently. The President would hardly meet the Establishment of the nineties halfway. However, at present, those who was in the new Putin's team require changes, Alexei Makarkin says.

"The problem of investing pension reserves arises from the demographic situation which is changing for the worse. It becomes more difficult for employed persons to provide a rising force of retirees," says Natalia Orlova, the Chief Economist of Alfa-Bank. According to her, the government should study the expertise of stock markets of East-European markets which have already experienced a rapid rise and a steep fall. The government's intervention did not help flatten out prices of shares, but it made the market even more unstable. "The threat of financial collapses and a temptation of interventions complicate the task of a long-term reservation of pension funds," Natalia Orlova says.

"Risks of investing pension reserves in "blue chips" arise mainly from the unstable state of the market. However, one should not draw conclusions based only on first-quarter results," says Evgeny Gontmacher, the head of the Center for Social Policy at the Institute of Economics of the Russian Academy of Sciences. Other experts agree with him. "Pension reserves are long money. It is not correct to evaluate the work of a management company on the basis of results of one quarter. Besides, management companies reported a higher result that the RTS Index," says Maxim Shein, the head of analytical department at BrokerCreditService. According to him, the stock market has a big potential, including after the transition of Russian companies to more transparent management methods.

Besides the Bank for Development with the authorized capital of 250 billion rubles, temporarily free funds of state corporations for public utilities reforming (240 billion rubles) and for development of nano-technologies (135 billion rubles) may be invested in shares. Arkady Dvorkovich, the head of the President's Expert Department, and Anton Siluanov, the Deputy Finance Minister, stated that these funds could be invested in reliable liquid assets.

Authors: Igor Pylaev, Anastasia Samotorova

Source: "Speculator of State", RBC daily, May 28, 2007