Moscow bourse takes on London for Russia listings

MOSCOW Wed Sep 14, 2011 11:00am EDT

MOSCOW (Reuters) - Russia must attract foreign investment and boost liquidity if it wants to take on London as the primary destination for Russian companies planning IPOs, Ruben Aganbegyan, the head of Moscow's MICEX exchange, told Reuters.

Out of eight Russian company IPOs this year, only one was held in Moscow -- raising just $14 million -- while six others successfully floated on the London Stock Exchange (LSE.L) for a combined total of $3 billion. There are currently 48 Russian companies on the LSE's main market out of a total of 1,415 as of the end of July, according to LSE data.

"What is needed is promotional work aimed at all those investors who have not been investing in our market," Aganbegyan said at the Reuters Russia Investment Summit.

"We will have to explain to issuers that liquidity is coming toward this market and they don't need to go elsewhere to seek liquidity," he added.

The rouble-denominated MICEX is in the process of merging with dollar-based rival RTS to create a single national champion -- part of President Dmitry Medvedev's plan to build an international finance center in Moscow.

The MICEX-RTS exchange plans to hold its own Moscow IPO, raising at least $300 million, from the second half of 2012, Aganbegyan said, although it will need a buoyant market to carry out a listing.

Upcoming developments in the creation of the combined bourse include the passing of a law endorsing a long-awaited central depositary from January 1 -- a process aimed at increasing liquidity on the exchange and attracting foreign investment.

"The centralized settlement system is a significant magnet for the liquidity to come," Aganbegyan told the summit held at the Reuters office in Moscow.

"It is going to be the major positive factor for (attracting) IPOs as it will increase the significance of equities versus depositary receipts," he added.

The merger will also help boost the volume of the Russian market, Aganbegyan said. MICEX daily volumes were around $2 billion in 2010, according to fund manager Prosperity Capital.

If the newly merged exchange does not carry out an IPO before the middle of 2013, RTS shareholders can apply to buy back their shares, Aganbegyan said, adding that the central bank, a MICEX shareholder, will retain around 22 percent in the common bourse.

Shareholders of Russia's benchmark RTS stock exchange approved a merger with rival MICEX in a nearly unanimous vote in August, and the Federal Anti-monopoly Service approved the merger of two exchanges in September.

(Editing by John Bowker and Jane Merriman)