Honest Victor, The Man Who Puts The Stock In Vladivostok

ERIC ELLIS, Vladivostok

5/31/1995

VIKTOR Sakharov admits to owning just 32 shares, with a collective value of no more than several thousand roubles, a few hundred dollars. "Of course, I am like any normal man, I want to have some money but I only do this for my salary," says the former marine biologist, now president of the Vladivostok Stock Exchange.

In a market where stocks rise and fall 2,000 per cent, Viktor claims he and his committee are as honest as the day they were born. And altruistic, too. No way did he have other stock stashed away in nominee and ghost companies as some of the 90 members exchange claim.

The Vladivostok exchange, situated in a converted Communist Party pleasure dome, is probably the most emerging of any international stockmarket. So emerging that a wander through its offices suggests little of the thriving market Viktor claims it is.

The Australian Financial Review visited the "trading floor" on a Wednesday afternoon when activity was supposed to have been in full swing. The two surly mafiosi furtively puffing Camels and exchanging dollars out the front were the only signs of anything suggesting commerce.

Inside, what passes for a trading floor has plenty of new computers but no one navigating them.

There is a simple reason for that. As much as 90 per cent of the trading of Vladivostok-listed companies takes place out-of-exchange.

Dated May 15, most stocks are last listed as having been officially traded in 1994 and one, the Dalnerechens Timber Co, not since September 1993.

However, Dalnerechens and others like it are actively traded nearly every day, just not through the exchange.

Says Australian-Russian lawyer Eugene Narodestsky: "The savviest traders trade outside the market."

Many privatised stocks have had phenomenal rouble rises. Witness the Avtotransport group's 100 to 7,700; the aptly named roadbuilder Active Society 100 to 15,000; fisheries house VBTRF 1,950 to 60,000 and cargo-handler Trading Port of Vladivostok 320 to 95,000.

This is frontier capitalism at its finest with none of the niceties of disclosure, shareholder suffrage or annual meetings, although Viktor says the exchange is pushing for the production of quarterly, half-yearly and annual reports.

"We do not have much regulation," says Viktor. "It is more profitable to make shares on the street. There you can escape taxation."

One perk of office for the head of a new exchange in an economy the potential size of Russia is foreign trips.

Viktor and his executives have enjoyed the hospitality of stock exchanges in Sydney, London, New York, Tokyo, Hong Kong and Singapore.

He likes the Australian settlement system, CHESS, and believes that the make-up of companies on the Australian Stock Exchange are a lot like the emerging profile of his bourse - agriculture, mining and industrial.

"The Australian system is more appropriate, more progressive for us. We have permission from Moscow authorities to develop an Australian-style system," he says.

He's had plenty of visitors. Explorers from Credit Suisse First Boston, J.P. Morgan, Morgan Stanley and Jardine Fleming have recently beaten a path to his door, sniffing the winds of change.

But for more conventional investors, maturity could be some way off. As one observer noted: "The exchange here doesn't have the same function that others do elsewhere."