Lyubimtseva_S_N__Koreneva_V_N_L_93_Kurs_angli

read that Russia has issued its Eurobonds in the international bond market, and the first issues were successful.

R.: Yes, they were. So far Russia has made several placements of Russian Eurobonds. The first $1 billion issue with a 9.25% interest was made in Zurich, the second issue was made in Germany and was denominated in Deutsche marks. We are thinking of new issues.

F.: For what purposes will the funds obtained by your government be used?

R.: The money will be spent on resolving most burning social problems, including elimination of arrears and payment of wages and salaries.

F.: I must say here that in addition to Eurobonds denominated in a single currency, the market is moving in favour of the Euro.

Words you may need:

bearer security предъявительская ценная бумага transnational n транснациональная компания placement n размещение (ценных бумаг)

lead manager банк, являющийся организатором и гарантом займа mature v наступать (о сроке платежа)

rate v присуждать рейтинг turnover n оборот

Ex. 14. Give extensive answers to these discussion questions:

What role do financial markets play today?

What are the major financial markets today?

How can financial markets be classified?

What is a bond?

What is the difference between debt and equity markets?

What does the global bond market consist of?

How do you assess the Russian Bond market?

How are emerging bond markets developing? What problems are they facing?

How are bond placements arranged?

In order to get prepared for participation in the class discussion of the above questions, write a short essay on the following:

a)A bond as a financial instrument.

b)Financial markets.

(Use: to classify, to divide, to create, to develop, to emerge) c) Bond market.

(Use: global, domestic, internal, external, national, foreign, to consist of, to decompose, issuer, to domicile) Ex. 15. Prepare a short talk on the following:

a)Future of the Russian debt market.

b)Prospects of restructuring Russia's treasury bill debt and GKOs.

c)Your opinion about the role of Russian government bonds as an instrument of monetary policy and a means to finance the budget deficit.

Ex. 16. Scan the available financial papers and summarize the attitude of foreign investors towards Russian

bonds placed abroad. READING PRACTICE

Ex. 17. a) Look through the text below to say what types of securities are described in it. b) Reread the text more carefully and explain how the US government uses debt instruments. US Government Securities

The US government relies heavily on debt financing. Since the 1960s, revenues have seldom covered expenses, and the differences have been financed primarily by issuing debt instruments. Moreover, new debt must be issued in order to get the necessary funds to pay off old debt that comes due.

About two-thirds of the public debt is marketable, meaning that it is represented by securities that can be sold at any time by the original purchaser through government security dealers.

Marketable issues include Treasury bills, notes, and bonds.

US Treasury Bonds have maturities greater than ten years at the time .of issuance, with denominations ranging from $1,000 upward. Some Treasury bond issues have call provisions under which the Treasury has the right to force the investor to sell the bonds back to the government at par value.

US Savings Bonds are nonmarketable securities, offered only to individuals and selected organizations. There is a limit to the amount that may be purchased by any person in a single year. Two types are available: pure discount bonds and bonds that pay interest semiannually but can be redeemed for par value at any time. To support credit for home purchase, the government has authorized the issuance of participation certificates. The most important certificates of this type are those issued by the Government National Mortgage Association (GNMA or "Ginnie Mae"), they are known as GNMA Modified Pass-Through Securities. Unlike most bonds, GNMA pass-through securities pay investors on a monthly basis an amount of money that represents both a pro rata return of principal and interest on the underlying mortgages.

US Corporate bonds. Corporate bonds are similar to other kinds of fixed-income securities. An issue of bonds is generally covered by an indenture, in which the issuing corporation promises a specified trustee that it will comply with a number of stated provisions, like the timely payment of required coupons and principal on the issue. The major types are as follows:

Mortgage bonds are debt that is secured by the pledge of specific property. In the event of default, the bondholders are entitled to obtain the property in question.

Collateral trust bonds are debt-backed by other securities that are usually held by the trustee.

Debentures are general obligations of the issuing corporation representing unsecured debt. A bond indenture will often require the issuing corporation to make annual payments into a sinking fund.

Words you may need:

treasury bond долгосрочные казначейские обязательства (облигации)

call provision условие займа, предусматривающее право эмитента досрочно выкупить ценные бумаги par value паритет, номинал

participation certificate сертификат участия

Government National Mortgage Association (GNMA) Правительственная национальная ипотечная ассоциация

pass-through security ценная бумага, выпущенная на базе пула ипотек pro rata adj, adv пропорциональный, пропорционально

fixed-income security ценная бумага с фиксированным доходом

indenture n письменное соглашение об эмиссии облигаций trustee n доверенное лицо, опекун

mortgage bond облигация, обеспеченная закладной под недвижимость pledge n залог

collateral trust bond облигация, обеспеченная другими ценными бумагами, хранящимися на условиях траста

unsecured debt необеспеченный долг

sinking fund выкупной фонд, фонд погашения задолженности

Ух. 18. a) Read the text below quickly to find the developments in the US bond market that occurred in the early 90s.

b) Reread the text more carefully to describe the changes in the Yankee offerings and the interests of US investors.

Borrowers Pile Up the Yankees

During the past six years, according to the Federal Reserve, foreign non-financial borrowers placed $170 billion of public and private bonds in the US – nearly four times the volume issued during all of the 1980s and taking the total amount outstanding to $264 billion last September.

Until recently, only the most creditworthy foreign names were able to tap the US bond market, the largest pool of capital in the world. Yankee offerings were mainly limited to Canadian provinces, supranationals such as the World Bank and triple-A-rated governments and corporations. But as long-term US rates have fallen, and some barriers to entry were removed, many more borrowers have entered the market. By some estimates, single-A and lesser credits accounted for 60% of last year's issues (of which 80% were for 10 years or longer).

The introduction of Rule 144a in April 1990 really opened the door, allowing issuers to offer bonds to large US institutional investors without registering the offering with the Securities and Exchange Commission (SEC). This exemption greatly reduces the time, expense and disclosure required, while extending the benefits of underwriting and secondary-market trading to these placements.

The adoption of Rule 144a also helped increase awareness among foreign issuers of the US bond market's unique attractions. "Many can tap 20-, 30and even 100-year maturities at costs not achievable anywhere else in the world".

On the demand side, US investors are becoming increasingly receptive to foreign names. In a recent survey of the 400 most active US institutional investors, JP Morgan found that foreign bonds now account for between 9% and 10% of the average portfolio, compared with 4% to 5% just three years ago. One reason for this interest is a relative decline in the volume of domestic bond issues, especially by US industrials. In these circumstances investors are looking for new ways to diversify their credit exposure and they have looked overseas.

But the most powerful force behind increased demand has been an attempt by US fund managers to boost returns in hopes of outperforming the benchmark indices.

Why Yankees? Since they don't come to the market often, their yield spreads may not be priced efficiently; it is not uncommon to see a 50 bp difference in spreads between apparently similar issues. Sophisticated managers are looking for "inefficiencies which the market will eventually recognize", resulting in higher bond prices.

Not surprisingly, these investors are focusing on Asia, expect more Yankee issues from Indonesia, India, Thailand and the Middle East.

Words you may need: pile up v накапливать

creditworthy adj кредитоспособный, платежеспособный

to tap the market выпускать ценные бумаги на рынок, использовать ресурсы финансового рынка triple-A-rated имеющий рейтинг ААА (высший кредитный рейтинг по системе Стэндард Энд Пур) single-A credit кредит, имеющий рейтинг А (низкий рейтинг)

Rule 144а правило 144а (правило Нью-йоркской фондовой биржи) disclosure n представление компанией информации о своей деятельности awareness n (зд.) осведомленность

receptive adj восприимчивый

exposure n риск потенциальных убытков benchmark index отправной индекс, базовый индекс spread n спред

bp (basis points) базовые пункты

Ex. 19. Study the financial section from a newspaper, which includes information about the bond prices of different companies, and explain how to read bond quotations:

UNIT 9. FINANCIAL MARKETS. THE STOCK MARKET

A. TEXT

STOCKS AND MARKETS

Stock Markets are the means through which securities are bought and sold. The origin of stock markets goes back to medieval Italy.1 During the 17th and 18th centuries Amsterdam was the principal centre for securities trading hi the world. The appearance of formal stock markets and professional intermediation resulted from the supply of, demand for and turnover in transferable securities. The 19th century saw2 a great expansion in issues of transferable securities.

The popularity of transferable instruments as a means of finance continued to grow and at the beginning of the 20th century there was an increasing demand for the facilities provided by stock exchanges, with both new ones appearing around the world and old ones becoming larger, more organized and increasingly sophisticated.

The largest, most active and best organized markets were established in Western Europe and the United States. Despite their common European origins there was no single model which every country copied. Members of stock exchanges drew up rules to protect their own interests and to facilitate the business to be done by creating an orderly and regulated marketplace.

Investors were interested in a far wider range of securities3 than those issued by local enterprises. Increasingly, these local exchanges were integrated into national markets.

The rapid development of communications allowed stock exchanges to attract orders more easily from all over the country and later the barriers that had preserved the independence and isolation of national exchanges were progressively removed, leading to the creation of a world market for securities. The 1980s saw the growing internationalization of the world securities markets, forcing stock exchanges to compete with each other. Cross-border trading of international equities expanded.

Although many securities were of interest to only a small and localized group, others came to attract investors throughout the world. Increasingly, arbitrage between different stock exchanges ensured that the same security commanded the same price4 on whatever market it was traded. London, Paris, New York became dominant stock exchanges.

Stock exchanges emerged as central elements in the financial systems of all advanced countries. Potential investors, insurance companies, pension funds, governments and corporate enterprises see securities as a cheap and convenient means of finance.

An investor who purchases new securities is participating in a primary financial market. An investor who resells existing securities is participating in a secondary financial market.

There are two basic types of stock markets – (1) organized exchanges, like the New York Stock Exchange (NYSE) or the London Stock Exchange (LSE), and (2) the less formal over-the-counter markets.

The organized security exchanges are tangible physical entities, which have specifically designated members5 and elected governing bodies – boards of governors.

In contrast to the organized security exchanges, the over-the-counter market is an intangible organization. It is a network of security dealers who buy and sell securities from each other, either for their own account or for their retail clients. The over-the-counter market is normally conducted by telephone and computer reporting of price quotations between brokerage firms that "make a market": that is, agree to buy and sell a particular security. Securities that are not listed on exchanges are traded "over-the-counter". In general these include stocks, preferred stocks, corporate bonds, and other securities.

Investors need complete and reliable information about stocks and markets. In addition to the listings, the financial pages of newspapers in all countries contain price quotations and share indexes which give a broad indication of how the stock market, or a segment of the stock market, performed during a particular day. B. DIALOGUE

THE CORPORATE SECURITIES MARKET IN RUSSIA

Foreigner. What's your opinion of the present-day position of the corporate securities market in Russia? Russian: The market is still rather weak and sluggish. Compared with Western markets the number of actively traded stocks is small, liquidity is limited. Share prices of many corporations are going down. F.: It's not surprising. The market, due to the situation in Russia, is not attractive to investors. Foreign investors are cautious about sinking big money into Russia.

R.: The situation is embarrassing, particularly because it is recognized that the stock market stimulates economic development.

F.: In this connection, what measures are going to be taken to encourage the process of the securities market development?

R.: There's no simple answer to this question. Attempts are being made to create international electronic networks for long-distance trading in shares. We've started trading in the world major stock markets. F.: Do Russian commercial banks play an active role in the development of the stock market?

R.: Yes, they possess the required capital, developed infrastructure and highly qualified personnel. Very often they act as dealers in the primary market.

F.: In my country to have stocks listed, that is accepted for trading on the stock exchange, a firm must meet certain standards. Among other things, it must have a certain amount of earnings before tax, assets, etc. Are there any requirements that companies issuing shares have to comply with in your country? What

documents are to be submitted by the companies going through the listing procedure?

R.: For the primary offering, or primary distribution, the company must submit a prospectus of issuance. This document must contain full information about the securities the company is going to issue and all the details of the nature of the company's business, its capital structure and assets. The company is also required to complete the Russian stock exchange questionnaires to show its financial position.

F.: Are the results of the stock exchange examinations and relevant materials about the companies listed at the exchange made public?

R.: Yes, you can find all this information in specialized publications. The information is also broadcast by the Interfax channels.

Notes

1 The origin of stock markets goes back to medieval Italy. – Зарождение фондового рынка относится к эпохе средневековой Италии.

2 The 19th century saw a great expansion in issues – В 19 веке наблюдалось резкое увеличение выпуска ценных бумаг

3 were interested in a far wider range of securities – проявляли интерес к гораздо большему числу ценных бумаг

4 the same security commanded the same price – одни и те же ценные бумаги имели одинаковую стоимость

5 The organized security exchanges are tangible physical entities, which have specifically designated members... – Организованные фондовые биржи являются реально существующими

экономическими субъектами, имеющими конкретных членов...

VOCABULARY LIST

A. stock marker фондовый рынок

origin n происхождение, (зд.) начало, зарождение principal adj главный

intermediation n посредническая деятельность

transferable securities ценные бумаги, которые могут быть переуступлены другому лицу expansion n расширение

facilities n (зд.) услуги

sophisticated adj (зд.) сложный, более современный draw up v составлять (документ)

orderly adj упорядоченный increasingly adv все больше и больше integrate v интегрировать, объединять communications n средства связи allow v позволять, делать возможным barrier n барьер, препятствие isolation n изоляция, обособление lead v приводить (к чему-л.)

internationalization n интернационализация (экономики, капитала) force v вынуждать, заставлять

cross-border trading международная торговля equity n (зд.) обыкновенная акция

arbitrage n арбитражные операции emerge v возникать

advanced countries развитые страны over-the-counter market внебиржевой рынок governing body руководящий орган

in contrast to в противоположность (чему-л.) network n сеть

dealer n дилер, биржевой торговец for smb's account за чей-л. счет retail client мелкий клиент

conduct v (зд.) руководить, управлять quotation n котировка

list v вносить в курсовой бюллетень preferred stocks привилегированные акции

listing n допуск ценной бумаги к официальной торговле на фондовой бирже share index фондовый индекс

indication n показатель segment n сегмент (рынка)

В. corporate securities market рынок корпоративных ценных бумаг sluggish adj вялый

cautious adj осторожный

to sink money вкладывать, инвестировать деньги possess v обладать, владеть

listing procedure процедура допуска ценной бумаги к торговле на бирже primary offering первичное предложение

primary distribution первичное распределение prospectus n (зд.) проспект эмиссии complete v заполнять

relevant adj относящийся к делу, уместный

EXERCISES

Ex. 1. Answer these questions:

A.1. What is the Stock Market? What contributed to the emergence and growth of stock exchanges? 2. Where were best organized stock markets established?

3. What general trend in the stock market development has been observed over the years of its existence?

4. What stock exchanges have become most dominant? What part do they play in the financial systems of advanced countries?

5. What are the basic types of stock markets? How are they conducted?

B.1. What is characteristic of the corporate securities market in Russia?

2.Is the stock market of great importance to industry?

3.What is being done to contribute to the development of the Russian Stock market?

упорядоченный, регулируемый рынок; ценные бумаги, выпущенные местными предприятиями;

местные биржи были объединены в общенациональные фондовые рынки; торговля корпоративными ценными бумагами расширилась; внебиржевой рынок; покупать и продавать

ценные бумаги за свой счет; внебиржевой рынок осуществляет операции по телефону и с помощью компьютеров; ценные бумаги, не зарегистрированные на бирже;

B. рынок все еще малоактивный; количество продаваемых акций невелико; ликвидность ограниченна; цены на акции падают; инвесторы проявляют осторожность; стимулировать экономическое развитие; развивать инфраструктуру; первичный рынок; зарегистрировать на бирже; первичное размещение; представить проспект эмиссии; структура капитала.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1). Ex. 5. Sum up the content of the dialogue. Use the phrases from Ex. 5 (Unit 1).

Ex. 6. Read the dialogue, translate the Russian remarks into English and act it out.

Foreigner. We know that the board of directors of your steel plant announced the decision to issue new shares. Why was the decision made? How much are you going to raise?

Russian: Наша компания является вторым по величине (second largest) производителем стали в нашей стране. Если собрание акционеров одобрит решение совета директоров, то через два месяца мы осуществим размещение наших новых акций. Мы планируем получить 100 миллионов долларов и использовать их на модернизацию и расширение производства.

F.: What rules will you have to comply with? Is the listing procedure complicated?

R.: В соответствии с нашим законодательством, компании, желающие осуществить выпуск своих акций, должны быть зарегистрированы на бирже и зарегистрировать свои акции для их допуска на биржу. У нас существуют определенные требования в отношении размера выпуска акций, числа акционеров, прибыли предприятия и т.д.

F.: So you are registered on the Stock exchange. Was it difficult to get registered?

R.: Нет, при нашем первом размещении акций мы представили обычный комплект документов,

включающий уставные документы компании, проспект эмиссии и нашу финансовую отчетность. F.: In my opinion, it may not be the best possible time for the placement. Do your shareholders welcome the idea?

R.: Да, они уверены, что наши акции будут пользоваться большим спросом. Мы рассчитываем на

западных инвесторов, с которыми мы уже много лет сотрудничаем. Ex. 7. Work on vocabulary and grammar.

a)Study the key words of the unit in the dictionary at the back of this book: securities, market, equity capital, options, quotation;

b)Think of word combinations with:

market, stock, share, securities, debt, placement, trading c) Match the verbs from (a) with the nouns from (b) below:

Ex. 8. a) Supply the articles where necessary. b) Write down 3-5 questions about the text.

с) Name the problems of emerging markets mentioned in the text and say which of them are typical of Russia.

In 1990 the fastest rising stock markets in ... world were those emerging in the developing countries. There are now more than 50 stock exchanges in ... developing world: some are insignificant or dormant, others are active and growing.

It was once widely presumed that poor demand for securities would be the biggest handicap to ... emergence of stock markets in the developing world. There were not enough potential buyers in developing countries. However, it is now evident that there is generally ... adequate demand for securities, in both the primary and secondary markets, arising both from speculative interest and from ... portfolio needs of financial institutions.

Even if the emerging stock markets have some demand-side difficulties, ... more general, continuing and severe problem has been ... insufficient supply of securities. The chief markets problem in developing countries is that the secondary market for bonds and shares is often inactive. There are often not enough buyers and sellers to make ... steady market. Quite often institutional stockholders hold securities firmly matched against their future liabilities rather than engaging in frequent trade. When institutions do enter ...

secondary market they may try to buy or sell in large lots, thus making a big price disturbance. As institutions amass large blocks of shares they may be tempted to exercise their market power, especially in

... field of corporate takeovers.

Speculation has been common in most of the emerging stock markets and very noticeable because of ...

thinness of the markets. While the opportunity for speculation is one of the chief attractions of any stock market, the line between speculation and sharp practices is something hard to draw.

Priviliged placements, insider trading, short selling and other questionable practices have occurred throughout the developing world.

In these circumstances, ... pure theory of international trade suggests that stock markets would not be viable in all countries but would cluster at a few points of... globe, determined by the location of factor skills and time zones.

Words you may need:

dormant adj спящий; (зд.) бездействующий presume v полагать, допускать, считать handicap n недостаток, помеха, препятствие steady market устойчивый рынок

large lots крупные лоты

big price disturbance существенное колебание цен amass v накапливать

takeover n поглощение (одной компании другой) thinness of the market узость рынка

speculation n спекуляция (торговля ценными бумагами с целью получения прибыли) sharp practice мошенничество, надувательство

insider trading незаконные операции с ценными бумагами на основе «внутренней» информации о деятельности компании эмитента

short selling «короткая» продажа viable adj жизнеспособный cluster v группироваться

Ex. 9. a) Supply the prepositions where necessary.

b)Write down 3-5 questions about the text.

c)Describe the trends in the major equity markets mentioned in the text. Equity Market

In return ... the use of their funds, investors in a corporation are issued certificates, or securities. Corporate securities represent claims ... the assets and future earnings of the firm. Corporate securities take the form ...

either common stock or preferred stock.

In 1980 the US equity market was the largest domestic equity market in the world and was three times larger than its nearest rival, the Japanese market. During 1990 there were periods when the capitalization of the Tokyo Stock Exchange was higher than the NYSE. These relative values can fluctuate quite dramatically. For example, the Tokyo Stock Exchange market capitalization fell... 29% in the mid two quarters of 1990. The London Stock Exchange only fell by 17% ... this period. As a result, the value rankings are not stable over short periods. However, one can see the rapid rise of the Tokyo stock exchange ... the 1980s, the relative decline of US stock markets, and the slow but sure growth of London and the other European stock exchanges.

The UK has a large domestic and international equity market relative to the size of its economy. This market is the most international in terms of foreign companies listed and the extent ... foreign equities traded. In contrast, German equity markets are small relative ... the size of the economy. The UK, Canadian and the US domestic capital markets are very similar ... each other in that many domestic firms are quoted and equity is a significant form of finance. However, most of the smaller domestic capital markets can be characterized as consisting ... very few firms which are widely publicly held. Small group and family