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Thursday, December 8, 2016

Despite sanctions, Russia attracts investors


At first glance “emerging markets” — China, Russia, Brazil lost its luster, which they have recently attracted investors. But despite the instability, they still attract investors — those who are willing to take risks for higher return. This is clearly seen on the example of Russia.


photo: morguefile.com

Recently, Bloomberg reported: “Russian stocks traded at a level close to the monthly maximum. Sberbank shares are rising for five consecutive days. The index of 50 largest Russian companies, the Micex gained 0.4 percent… And from the beginning of the year, Russian equities rose by 9.5%: this was facilitated by the increase in oil prices, which in January of this year was at a record low”.

Further, the Agency quoted Western analysts, working in Moscow and seeing the most “future improvements”, which positively affects the market value of Russian securities.

Of course, there is a huge amount of negativity — it is sufficient to say that recently the Organization for economic cooperation and development (OECD) has lowered the forecast of growth of the Russian economy this year. However, the OECD has lowered its forecast for the world in General, and for the United States, European Union and Japan separately. Everyone got their own dose of analytical pessimism.

In Russia, in addition to this General negativity of the investors, of course, discourages bad climate of relations between Russia and the West: Western businessmen are afraid to “get under the distribution” because of the policy. Some Western firms that have a long and productive on the Russian market, today his leaving. Example — U.S. carmaker General Motors. In 2001 an agreement was signed between GM, AVTOVAZ and the European Bank for reconstruction and development; in 2002, the then GM CEO Jack Smith cut the ribbon at the opening of the joint venture; and in 2016-m Mary Barra, who is GM today, decided to close all operations of the company in Russia, although in one only the first quarter of this year it struck a $600 million impact on the balance sheet of GM.

Apparently, GM executives decided that a lot better to lose now than to lose everything later. So the company stops indefinitely its plant in Shushary near St. Petersburg and stops selling in Russia running brands Opel and Chevrolet. Still selling in the Russian market inspirational brands — Cadillac, Camaro, Corvette, and SUVs. But it is a trifle, albeit an expensive one; the mass market these machines do not have.

Wall striewski investors had to taste how GM “reinvented itself” by refusing from its traditional profile of global concern (in addition to care from Russia Madame Barr and company decided to leave in Europe only “Opel” and remove the “Chevrolet”; under their axe were Assembly plants in Australia, Indonesia, etc.). However, many experts of the automotive industry, and financiers do not share your enthusiasm for “cutting the excess”. Reuters cites the opinion of the American auto industry consultant Warren Browne against Russia: “Toyota is not going away. BMW is not going away. Ford is not going away… Solve the problems in Russia can be different in other ways in addition to care”.

Reuters explains: the problems that GM has had to face in Russia, are as follows. Local authorities have required the company to subscribe further expansion of production and increasing local components; these measures involve costs, and the market for the sale of cars in Russia, meanwhile, sank. Hence, it is necessary or to agree to proposed conditions deliberately at a loss, most severe way to cut costs is to cut to the quick, or to leave. GM decided to leave. Seems logical, but the questions remain without answers. GM was once Russia’s largest foreign investor, but when (not if) she wants to come back, it would be difficult to not obtain even this status, and basic “place in the sun”. Further, it is not completely out and going to import my “Camaro” and “Corvette” — what will be the attitude towards the goods of the customs authorities? And what will return to re-create a dealer network and to recruit workers in the factories?

Emerging markets should not be neglected, says one of the leading analysts of the British Bank HSBC Jose Rasco: “Our economists have lowered the economic growth forecast for developed markets, but few have changed the Outlook for emerging markets. It is expected that Russia and Brazil will come out of recession until 2017, and the data coming from China, are beginning to show the effectiveness of measures to stimulate the economy.” In light of this, says Roscoe, HSBC has increased its investments in securities of developing countries and improved the Outlook for China, Russia, Malaysia, Turkey, Brazil and the Philippines. A higher rate of growth of “new economies”, the analyst, to help those lagging behind developed economies, in particular the EU — will grow as exports from developed to developing countries.

Reuters writes that “emerging markets look well — perhaps better than the United States.” Investors are attracted to securities of developing countries, especially in light of “historically low values” cost of securities of the U.S. Treasury. “The developing economies, notes Reuters, is usually associated with an increased risk, but many of these countries have debt ratings of investment level through proper financial management. In addition, the governments of emerging market countries have accumulated less debt burden, budget-intensive than their U.S. funds. These countries have built up substantial foreign exchange reserves, and introduced floating exchange rates, so as not to repeat the mistakes made in the 80-ies and 90-ies”.

According to financial analysts, bonds developing States are a good complement to the portfolio of a successful investor. Perhaps this assessment was inspired by the Russian government at a recent auction of government bonds of the Russian Federation, which carried out VTB Bank (Western banks have listened to the warning of the European and us authorities and gave up his partnership in this transaction).

The Russian government claims that the demand for securities of the Russian Federation was very high and the auction was highly successful, etc. In the West sound completely different assessment: the demand has not met expectations and came mainly from the Russian assets abroad and not from the Western investors.

The truth, as always, lies somewhere in the middle. Clearly only one thing: the picture for Russia is difficult but not hopeless.

New York.

Sanctions . Chronicle of events

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