OREANDA-NEWS. August 19, 2011. The decision to allow Russian companies to increase the proportion of their shares which can be issued abroad from the current level of 25% to full placement has been postponed until finalisation of the law governing Russia’s new central securities depositary, Vedomosti reports today (18 Aug). The exceptions to the proposed new rule are strategic companies, where the cap would be kept at 25%, and mineral extractors, which have a 5% threshold.

The business daily cites comments made in June by Dmitry Pankin, head of the Federal Financial Markets Service, that the Russian Duma would discuss the law on the central depositary in its autumn 2011 session. This would imply that the central depositary will likely come into force in 2012.

Bottom line

When President Dmitry Medvedev on 1 July ordered the government to lift the restriction on domestic companies wanting to list securities abroad and mandated the creation of a central securities depositary, we expressed some scepticism that it would be achieved by the deadline of 1 Sep 2011 (please refer to our Daily Dashboard story Medvedev Orders Government to Lift Restrictions on Foreign Listings, published 4 July 2011).

The stocks which could now come under downward pressure are those which have shown a steeper reduction in the discount in the local price vs the GDR since 1 July, i.e. those which suggest that investors bought the local stock at a discount in hopes of shortly converting them into higher-priced GDRs.

Separately, we maintain our view that government efforts to improve market regulations and expand market infrastructure are certainly positive for the longer-term development of Russia’s capital markets.