Putin the President, Putin the Stock Broker

Say what you will about President Vladimir Putin, but no one would dispute his firm grip on power in Russia. However it appears that his grasp of finance is not nearly as tight. Both Gref and Kudrin shuddered to think of this Hugo Chavez-style proposal.

Putin proposes state investment in domestic stocks Russian Finance Minister Alexei Kudrin, analysts critical of the proposal By Polya Lesova, MarketWatch NEW YORK (MarketWatch) — Russian President Vladimir Putin’s proposal that his government invest energy revenues in the domestic stock market to prop up prices is bad news for investors, analysts say. In a cabinet meeting Monday, Putin “suggested studying the possibility of investing funds received from sales of Russian energy in Russian blue chip stocks, in light of the stock market’s stagnation during the first quarter of 2007,” according to a release published on the Kremlin’s official website. “It’d be a rather ill-advised move to pump up the stock market,” said Lars Christensen, senior analyst at Denmark’s Danske Bank. “The government should stay out of that.” “We have far too much liquidity in the Russian equity and property market,” he said. “And that could be inflationary and an asset bubble could develop.” Rory MacFarquhar, analyst at Goldman Sachs European Economic Research, agreed. It’s “bad news — even for the equity market, the supposed “beneficiary” of this proposal, since it opens up a new risk of state intervention in what had been until now a relatively well-functioning and un-politicized market,” MacFarquhar said in a research report. “There is no macroeconomic justification for such intervention, especially as shares are not widely owned by the Russian population and the level of equity market has no perceptible impact on household consumption,” he said. Russia’s benchmark RTS stock index has declined 3.2% year-to-date, a disappointing performance given that it was the second-best performer among major world stock indexes in 2006.

Full article here, Kremlin transcript here.