lopment. Crisis in October 1997 as a seed of crisis in August 1998What the world financial crisis was, Russians knew basically from the books. It was so before October 23, 1997, when after unprecedented collapse of the world’s major stock exchanges it became clear that this could happen in Russia as well. Because Russian stock market became a part of the world financial system. The major cause of the stock exchange collapse was common crisis of the exchange markets in South Asian countries, which were characterized by rapid economic growth and by extremely easy accessibility to the western credits. Financial market was developing correspondently. Cash inflow had been accompanied by skyrocketing growth of the securities rates. However, by the end of the summer the external debt of some South Asian countries approached the critical point. At the same time the export, the basis of the financial pyramid, essentially reduced its growth, causing the trade balance deficit. As a result of this foreign exchanges crisis the capital forwarded to Hong-Kong stock exchange, which at the moment managed to hold its market positions. On that day an unprecedented crush of the stock rates was recorded at Hong Kong stock exchange, the cumulative index dropped by 1600 points, or 14%. Panics embraced the market. The world’s largest investors urgently began to call back their funds not only from Hong-Kong exchange, but also from all South Asian stock markets. Then everything worked according to domino scheme – crisis jumped to all major exchanges. On October 27, 1997 Dow Jones dropped by more than 550 points, which was the record fail in its whole history. It was deep night in Russia when it happened, and therefore the crisis came to them only on the following day. In first minutes of the beginning of trades at Russian stock market brokers characterized the situation as “near to collapse”. Foreign investors, who played a major ro...
