Thursday, 30 October 2008

LSE slows Russia push --- Market turmoil, IPO drought curbs Moscow office plans

Wall Street Journal Europe
By Jason Corcoran in Moscow

30 October 2008

Moscow -- THE LONDON Stock Exchange Group PLC has dropped a plan to open an office in Moscow after the financial crisis wiped out the prospects for Russian stock issuance for at least 12 months.

The decision to call off the Moscow office was taken after a group of companies in Russia and the Commonwealth of Independent States pulled stock listings amid a plunge in stock markets. Until recently, Russia had been seen as a possible source of growth for the larger exchange, which is facing competition from new rivals.

Jon Edwards, director of CIS and Central and Eastern Europe at the LSE, said the exchange had given the green light for the opening of a Moscow office before the country's economic crisis began in August. "We pulled plans to open in Moscow when we realized the severity of the crisis," he said.

Russian public-affairs and media company PBN said capital-raising activity in the CIS had slumped in the third quarter to half of the level seen last year, and is now at its lowest level since 2004.

So far this year, there have been seven initial public offerings by companies in Russia, Kazakhstan and the Ukraine, raising $1.7 billion, according to PBN. "To date we know of 43 companies that postponed or pulled their flotations this year," said Peter Necarsulmer, PBN's chief executive.

"We are very aggressively focusing in Russia's regions for companies ready to hit the ground running for capital raising, which we hope will open 12 months rather than 18 months as is expected," Mr. Edwards said at the sidelines of an investor conference. He said he had recently returned from company visits in metals-and-mining town Novosibirsk in Siberia and oil town Khanty-Mansiysk in Russia's Far East.

Like many other large exchanges, the LSE is dealing with the effects of the economic downturn and rising competition. Revenue at Europe's main incumbent stock exchanges have come under pressure in recent months from falling stock markets and the emergence of low-cost rivals, such as Turquoise and Nasdaq OMX Europe.

According to the World Federation of Exchanges, the total value of shares traded at the LSE fell more sharply than at any other large European stock market in the year to September, although the LSE's trading volumes rose faster than its peers.

Faced with low-cost rivals and dwindling volume, the LSE is likely to cut the fees it charges traders by 10% over the coming year to maintain competitiveness, said Credit Suisse analyst Rupak Ghose in a research note released Wednesday.

A spokeswoman for the LSE declined to comment on potential fee cuts and said that the WFE figures were of limited interest because different exchanges take report trading figures differently.

(Copyright (c) 2008, Dow Jones & Company, Inc.)

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