What is NASDAQ?

(inset to the article “Minus one and a half billion” )

(Photo: AP )

During the second half of last year, first the foreign and then the Russian press wrote more and more often about the fall of the NASDAQ Composite index. News about the adventures of a hitherto unfamiliar abbreviation did not appear on the front pages of financial publications. Finally, it came to forecasts of a sharp decline in the Russian Internet industry, for a certain part of which the troubles with NASDAQ should become almost fatal. In particular, this is the opinion of the director of the Internet Group, David Gandler, which we present below . “Itogi” considered it necessary to preface this article with a brief story about what NASDAQ is, what exactly happened to it, and whether the devil is really as terrible as he is portrayed to be.

NASDAQ (National Association of Securities Dealers Automated Quotation) is not a stock exchange in the strict sense of the word. Getting your company's shares admitted to NASDAQ (listing) is much easier than on the NYSE (New York Stock Exchange); in addition, shares of both American and foreign companies are traded on this platform (there are approximately 500 of them out of five thousand - for example, the Russian Golden Telecom). NASDAQ (over-the-counter stock market) arose in the United States in 1971 on the initiative of officials of the Securities and Exchange Commission, since in the 60s the over-the-counter market in the United States had low liquidity, and financial statements for companies were difficult to access (companies listed on the stock exchange , on the contrary, must provide full reporting about themselves). The total capitalization (total value of all shares) of companies listed on NASDAQ reaches six trillion dollars. Of course, almost all new entrants to the market head to NASDAQ (which is much simpler than the NYSE), and since most of the notable newcomers in recent times have been in the so-called high-tech sector, this exchange has naturally become associated with the state of affairs in the Internet industry .

At the beginning of last year, the NASDAQ index began to fall, and this continued throughout the year; the disastrous fall in December made the most seasoned brokers tremble. In the new year, the index curve moves irregularly, but it is clear that in general the downward trend will continue in the near future. Investors began to lose a lot of money, leave the market, which fell even faster as a result, etc., as in the fairy tale about the white bull. What happened?

The reason for the NASDAQ's misfortunes is its very essence - that it is the embodiment of the "high-tech" orientation of the stock market. The “new” economy of the Internet era operates according to slightly different laws from the usual ones, and it is not entirely clear how to regulate it. In 1999-2000, the American economy developed at a record pace. According to the classical economic model, low unemployment and high consumption sooner or later, unfortunately, lead to inflation and recession. Capitalism has long figured out how to deal with such cyclical crises: a proven method is to raise the federal funds rate (they have been raised several times since mid-1999), which makes bank loans more expensive. This, in turn, causes the growth of “normal” traditional companies to slow down. Their profits are falling, and so are their stock prices. The economy as a whole slows down - instead of releasing the steam from the boiler through an explosion, they resort to a humane valve.

This method did not work for the “new” economy - it was not focused on bank loans and was fueled mainly by the sale of shares. Since the “new” economy is still connected with the traditional one, it responded to treatment, but later than necessary. The already “overheated” NASDAQ did not feel the healing injection in time and... exploded. Now we are no longer talking about smooth, almost imperceptible government regulation, but about restoring the trust of the mass of investors, which is much more difficult.

How closely are we tied to the NASDAQ crash? The general tone of forecasts regarding the further development of the Runet is quite pessimistic - investors, they say, have become disillusioned with the hi-tech market even in America, let alone Russia. However, long-term statistics demonstrate that emerging markets, having initially sunk to the bottom with the leading market (this is now happening in Russia), often recover faster than their older brother: investors are not going anywhere and are starting to look around in search of profit. The money that leaves NASDAQ will end up somewhere - and many risk-taking investors in developing countries are not afraid.