Wall Street Journal Europe
April 28, 2009
By JASON CORCORAN
MOSCOW -- Nick Jordan, one of the highest-profile bankers in Russia, has lost out on a top job at his employer, Nomura Holdings, putting his future at the Japanese bank in doubt and possibly heralding the end for Moscow's best-paid foreign "rainmakers."
Mr. Jordan had been named in an internal memo last month as the future head of the combined Nomura-Lehman Brothers business in Russia and the Commonwealth of Independent States.
But now Maxim Seltzer, who joined Nomura in 2006 and was made general director of Nomura CIS in March 2007 when Nomura opened an office there, is getting the job, according to a Nomura spokesman.
It wasn't immediately clear what had prompted the rethink at the Japanese bank. People familiar with management's thinking said Mr. Jordan was felt to be much too expensive in the current climate. Also, he is London-based and travels to Moscow while Mr. Seltzer has always been based full-time in Moscow.
The American banker was hired two years ago by Lehman Brothers from Deutsche Bank to lead the U.S. bank's second foray into Russia. He had spent a decade at Deutsche Bank AG working on deals involving energy company Gazprom and other companies closely linked to the Kremlin.
Most of the team Mr. Jordan recruited over the past two years in Moscow have left or have been let go, according to people familiar with the situation. These include Peter Ghavami, who had been head of capital markets and who joined Standard Bank earlier this year.
Mr. Jordan declined to comment. Nomura said it "was committed" to Russia and the CIS and had "an active" mergers and acquisition and initial public offering pipeline.
Competition between the largest international and domestic banks to sign Russia's leading bankers had resulted in multi-million dollar guaranteed remuneration packages in recent years. But the slowdown in capital markets has forced banks with Russian business to cut their costs and salaries.
A second foreign rainmaker, Bob Foresman, is relocating with his family back to the U.S. and will commute to Moscow for 12 working days a month as deputy chairman of Renaissance Capital, part of Renaissance Group. A Renaissance Capital spokesman said Mr. Foresman had a young family and he wanted them to go to school in the U.S. and learn to play American sports.
Tuesday, 28 April 2009
Cash-strapped oligarchs forgo art and sushi
Financial News
By Jason Corcoran
27 April 2009
Letter from Moscow
The opening of upmarket Japanese restaurant Nobu this month on Moscow’s elite shopping drag of Stoleshnikov Lane is long overdue, but its timing may be suspect.
Sushi and sashimi have long overtaken borscht and blini as the preferred staple of moneyed Moscovites. In fact, local Mexican and Italian eateries nearly always provide an extensive sushi menu, along with the obligatory hookah water-pipe, to cater for the demand.
The Nobu chain, which was co-founded by Hollywood actor Robert De Niro, opened in Moscow a fortnight ago after three years of planning.
Both De Niro and his partner Nobu Matsuhisa flew in for the occasion and had to bat away questions about opening a high-end dining establishment during an economic crisis.
Some of the area’s previous tenants have fallen victim to the credit squeeze, with fashion boutiques owned by Alexander McQueen and Stella McCartney shutting up shop earlier this year. Moscow’s fickle restaurant trade has also been badly hit with sales plummeting by as much as 50% since the financial crisis began, according to consulting group Restcon.
Sushi is a saturated market and there is some evidence to suggest patrons are favouring mid-market chains Yaposha and Tanuki rather than splashing out in upmarket versions owned by the ubiquitous Arkady Novikov, who is Russia’s answer to Gordan Ramsay.
Sourcing huge volumes of fish for a land-locked city must also add to the expense and Nobu’s prices may put off some cash-strapped oligarchs.
US magazine Forbes says the economic downturn has wiped more than $500bn from the fortunes of the 100 wealthiest Russians in the past year. In its annual rating, Forbes estimates the combined wealth of Russia’s 100 wealthiest people is about $197bn. Last year, it was $720bn.
The crisis has hurt the Bolshoi Theatre, where budgetary constraints forced it to scrap a premiere of Othello and call off a ballet tour of Mexico. The audience at a recent classical performance in the Tchaikovsky Concert Hall was less than half full as spending on arts takes a hammering.
Over on Red Square, even the mummified corpse of Soviet leader Lenin is feeling the pinch. The founder of the Soviet Union usually has suits of the finest materials ordered every three years from Switzerland. Tough times mean he’s going without new clothes for his 139th birthday.
Demand for luxury yachts and private jets has collapsed, according to an industry source close to the situation. New car sales in Russia declined 40% overall in the first quarter, but a few luxury brands such as Hummer and Cadillac are bucking the trend.
Russia’s oligarchic class may be tempering their conspicuous consumption. Stories of outlandishly lavish birthdays and high-jinks in Alpine resorts have been thin on the ground at a time when many magnates are going cap-in-hand to the Kremlin.
But there are signs the Government has run out of patience with indebted oligarchs. The Kremlin has already frozen a $50bn facility at state corporation VEB to help refinance foreign debts after just $11bn was distributed.
Sergey Stepashin, chairman of the audit chamber, recently warned the wealthy to sell their jets, villas and football clubs to settle their accounts rather than asking for state help.
Russian businessmen owe about $500bn in foreign debt, with $130bn due this year. Many are in tough negotiations with western creditors and will be forced to take their medicine unless the state decides otherwise.
By Jason Corcoran
27 April 2009
Letter from Moscow
The opening of upmarket Japanese restaurant Nobu this month on Moscow’s elite shopping drag of Stoleshnikov Lane is long overdue, but its timing may be suspect.
Sushi and sashimi have long overtaken borscht and blini as the preferred staple of moneyed Moscovites. In fact, local Mexican and Italian eateries nearly always provide an extensive sushi menu, along with the obligatory hookah water-pipe, to cater for the demand.
The Nobu chain, which was co-founded by Hollywood actor Robert De Niro, opened in Moscow a fortnight ago after three years of planning.
Both De Niro and his partner Nobu Matsuhisa flew in for the occasion and had to bat away questions about opening a high-end dining establishment during an economic crisis.
Some of the area’s previous tenants have fallen victim to the credit squeeze, with fashion boutiques owned by Alexander McQueen and Stella McCartney shutting up shop earlier this year. Moscow’s fickle restaurant trade has also been badly hit with sales plummeting by as much as 50% since the financial crisis began, according to consulting group Restcon.
Sushi is a saturated market and there is some evidence to suggest patrons are favouring mid-market chains Yaposha and Tanuki rather than splashing out in upmarket versions owned by the ubiquitous Arkady Novikov, who is Russia’s answer to Gordan Ramsay.
Sourcing huge volumes of fish for a land-locked city must also add to the expense and Nobu’s prices may put off some cash-strapped oligarchs.
US magazine Forbes says the economic downturn has wiped more than $500bn from the fortunes of the 100 wealthiest Russians in the past year. In its annual rating, Forbes estimates the combined wealth of Russia’s 100 wealthiest people is about $197bn. Last year, it was $720bn.
The crisis has hurt the Bolshoi Theatre, where budgetary constraints forced it to scrap a premiere of Othello and call off a ballet tour of Mexico. The audience at a recent classical performance in the Tchaikovsky Concert Hall was less than half full as spending on arts takes a hammering.
Over on Red Square, even the mummified corpse of Soviet leader Lenin is feeling the pinch. The founder of the Soviet Union usually has suits of the finest materials ordered every three years from Switzerland. Tough times mean he’s going without new clothes for his 139th birthday.
Demand for luxury yachts and private jets has collapsed, according to an industry source close to the situation. New car sales in Russia declined 40% overall in the first quarter, but a few luxury brands such as Hummer and Cadillac are bucking the trend.
Russia’s oligarchic class may be tempering their conspicuous consumption. Stories of outlandishly lavish birthdays and high-jinks in Alpine resorts have been thin on the ground at a time when many magnates are going cap-in-hand to the Kremlin.
But there are signs the Government has run out of patience with indebted oligarchs. The Kremlin has already frozen a $50bn facility at state corporation VEB to help refinance foreign debts after just $11bn was distributed.
Sergey Stepashin, chairman of the audit chamber, recently warned the wealthy to sell their jets, villas and football clubs to settle their accounts rather than asking for state help.
Russian businessmen owe about $500bn in foreign debt, with $130bn due this year. Many are in tough negotiations with western creditors and will be forced to take their medicine unless the state decides otherwise.
Monday, 20 April 2009
Rudloff Steps Down From Russian Media Company
Dow Jones International News
By Jason Corcoran in Moscow
April 20, 2009
Hans-Joerg Rudloff, chairman of Barclays Capital, is stepping down from the board of Russian media holding company RBC because of a conflict of interest over $18 million in debt owed to him and his friends.
Rudloff, who has sat on the board of the indebted financial news provider since its initial public offering in 2002, told Financial News he could no longer sit on the board and be a significant creditor.
He said: "I can't simultaneously represent the interest of the company and its creditors while the company is being restructured. Together with my family and friends, we are owed $18 million, which is about 8% of the company's overall debt of $210 million."
RBC has been struggling to refinance its debt and defaulted on a 1.5 billion rouble ($45 million) bond last month.
Rudloff said his decision was nothing to do with any outstanding loans to Barclays Capital.
The company, which is being advised by Swiss bank UBS AG (UBS), has been looking for a strategic investor since last summer.
Billionaire oligarch Mikhail Prokhorov has offered to bail out the company in return for a 65% stake. Under a plan drawn up by bankers at Renaissance Capital Group Inc. (RNCG), Prokhorov is offering to buy the majority holding in RBC for $35 million, which will help the company repay creditors and finance its activities.
German financier Rudloff, who is also a director of oil group Rosneft (ROSN.RS), is expanding Barclays Capital's Moscow operation. The investment bank currently has about a dozen bankers in Moscow working in debt capital markets.
Rudloff said: "Eventually we want to have full teams for the full range of equity markets and M&A but it's too early to say how many we are going to recruit."
Barclays' retail banking business acquired Russian lender Expobank in March last year for $745 million. It has rebranded and revamped Expobank's 36 branches in western Russia.
By Jason Corcoran in Moscow
April 20, 2009
Hans-Joerg Rudloff, chairman of Barclays Capital, is stepping down from the board of Russian media holding company RBC because of a conflict of interest over $18 million in debt owed to him and his friends.
Rudloff, who has sat on the board of the indebted financial news provider since its initial public offering in 2002, told Financial News he could no longer sit on the board and be a significant creditor.
He said: "I can't simultaneously represent the interest of the company and its creditors while the company is being restructured. Together with my family and friends, we are owed $18 million, which is about 8% of the company's overall debt of $210 million."
RBC has been struggling to refinance its debt and defaulted on a 1.5 billion rouble ($45 million) bond last month.
Rudloff said his decision was nothing to do with any outstanding loans to Barclays Capital.
The company, which is being advised by Swiss bank UBS AG (UBS), has been looking for a strategic investor since last summer.
Billionaire oligarch Mikhail Prokhorov has offered to bail out the company in return for a 65% stake. Under a plan drawn up by bankers at Renaissance Capital Group Inc. (RNCG), Prokhorov is offering to buy the majority holding in RBC for $35 million, which will help the company repay creditors and finance its activities.
German financier Rudloff, who is also a director of oil group Rosneft (ROSN.RS), is expanding Barclays Capital's Moscow operation. The investment bank currently has about a dozen bankers in Moscow working in debt capital markets.
Rudloff said: "Eventually we want to have full teams for the full range of equity markets and M&A but it's too early to say how many we are going to recruit."
Barclays' retail banking business acquired Russian lender Expobank in March last year for $745 million. It has rebranded and revamped Expobank's 36 branches in western Russia.
Russia's markets retain grasp on equities
Wall Street Journal Europe
Jason Corcoran in Moscow
April 15, 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange, according to the chief executive of RTS Group.
The dollar-denominated RTS and the ruble-denominated Micex were both suspended more than 30 times since September. As a result, investors turned to trading Russian global depositary receipts in London.
Prior to the financial meltdown, Russian exchanges had 70% of the value of equities traded against London's 30%.
Following Russia's war with Georgia, a banking crisis, investor scandals and the accompanying erratic trading patterns that led to the temporary closures of the exchanges, the value of equities traded was divided almost evenly between Russian and London bourses. Overall daily volumes traded in Moscow also slumped to $2 billion from the $7 billion reached early in 2008.
RTS Chief Executive Roman Goryunov said March trading volumes indicated Moscow had won back territory ceded to London.
"Last month we saw the tendency had changed in Moscow's favor with 70% to 30%," he said.
A spokesman for Micex Group said its figures matched Mr. Goryunov's.
Mr. Goryunov said neither of the local exchanges had been suspended since the regulator introduced rules on March 1 that formalized when trading can be halted and allowed greater shifts in prices before a market is suspended. Along with higher oil prices and a stronger ruble, the new rules helped trading volumes to bounce back to pre-crisis highs.
"All of the problems last year caused the international investors to cease trading in Moscow in favor of London," Mr. Goryunov said. "The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left."
Previously, trading in a stock was suspended until the next day if its price fell more than 10% and trading in the market as a whole was suspended if the benchmark index fell by the same amount.
Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of Russia's Bank of Development and Foreign Economic Activity and state-controlled investment bank VTB Capital is also believed to have buoyed local trading.
VTB, which manages Russia's sovereign-wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2 billion, up 41% from $6.5 billion in February.
The brokers that handled the greatest volume in March were Russia's Troika Dialog, followed by Germany's Deutsche Bank AG and local bank Renaissance Capital.
The RTS index was one of the world's best performers in March after falling more than 70% from September last year through to February. It climbed 27% to 690 points as of March 31 from 545 points at the end of the previous month. It closed at 807.61 on Tuesday.
Separately, RTS outlined plans to compete with its established rivals in Europe by launching an anonymous dark-pool system.
This would be the first attempt by a Russian market to launch a dark pool, following several similar moves by European firms. Dark pools allow traders to buy and sell equities anonymously, which can cut trading costs. The group will launch RTS Standard, a new equity market that enables members to trade the most liquid RTS stocks through an anonymous order book, "in the upcoming future," according to a statement Tuesday.
RTS Standard will be open until 11.50 p.m. Moscow time to allow customers to trade alongside the main U.S. and European markets.
Brokers ITG, Liquidnet and Nyfix offer dark pools for European stocks, while NYSE Euronext launched SmartPool, the first exchange-backed European dark pool, on February 2. U.S. dark pool Pipeline is set to launch its European system this month and the London Stock Exchange Group PLC plans to go live with its Baikal dark pool before the end of June.
Jason Corcoran in Moscow
April 15, 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange, according to the chief executive of RTS Group.
The dollar-denominated RTS and the ruble-denominated Micex were both suspended more than 30 times since September. As a result, investors turned to trading Russian global depositary receipts in London.
Prior to the financial meltdown, Russian exchanges had 70% of the value of equities traded against London's 30%.
Following Russia's war with Georgia, a banking crisis, investor scandals and the accompanying erratic trading patterns that led to the temporary closures of the exchanges, the value of equities traded was divided almost evenly between Russian and London bourses. Overall daily volumes traded in Moscow also slumped to $2 billion from the $7 billion reached early in 2008.
RTS Chief Executive Roman Goryunov said March trading volumes indicated Moscow had won back territory ceded to London.
"Last month we saw the tendency had changed in Moscow's favor with 70% to 30%," he said.
A spokesman for Micex Group said its figures matched Mr. Goryunov's.
Mr. Goryunov said neither of the local exchanges had been suspended since the regulator introduced rules on March 1 that formalized when trading can be halted and allowed greater shifts in prices before a market is suspended. Along with higher oil prices and a stronger ruble, the new rules helped trading volumes to bounce back to pre-crisis highs.
"All of the problems last year caused the international investors to cease trading in Moscow in favor of London," Mr. Goryunov said. "The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left."
Previously, trading in a stock was suspended until the next day if its price fell more than 10% and trading in the market as a whole was suspended if the benchmark index fell by the same amount.
Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of Russia's Bank of Development and Foreign Economic Activity and state-controlled investment bank VTB Capital is also believed to have buoyed local trading.
VTB, which manages Russia's sovereign-wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2 billion, up 41% from $6.5 billion in February.
The brokers that handled the greatest volume in March were Russia's Troika Dialog, followed by Germany's Deutsche Bank AG and local bank Renaissance Capital.
The RTS index was one of the world's best performers in March after falling more than 70% from September last year through to February. It climbed 27% to 690 points as of March 31 from 545 points at the end of the previous month. It closed at 807.61 on Tuesday.
Separately, RTS outlined plans to compete with its established rivals in Europe by launching an anonymous dark-pool system.
This would be the first attempt by a Russian market to launch a dark pool, following several similar moves by European firms. Dark pools allow traders to buy and sell equities anonymously, which can cut trading costs. The group will launch RTS Standard, a new equity market that enables members to trade the most liquid RTS stocks through an anonymous order book, "in the upcoming future," according to a statement Tuesday.
RTS Standard will be open until 11.50 p.m. Moscow time to allow customers to trade alongside the main U.S. and European markets.
Brokers ITG, Liquidnet and Nyfix offer dark pools for European stocks, while NYSE Euronext launched SmartPool, the first exchange-backed European dark pool, on February 2. U.S. dark pool Pipeline is set to launch its European system this month and the London Stock Exchange Group PLC plans to go live with its Baikal dark pool before the end of June.
Monday, 13 April 2009
Russian exchanges claw back trading after turbulent six months
Financial News
Jason Corcoran in Moscow
13 April 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange after scores of suspensions and closures since last September sparked an investor exodus.
Investors turned to trading Russian global depositary receipts in London after the Micex and RTS exchanges were both suspended more than 30 times since September last year. Erratic trading patterns triggered shutdowns brought on by Russia’s war with Georgia, a banking crisis and investor scandals at miners Mechel and Uralkali.
Prior to the financial meltdown, Russian exchanges had 70% of equity trading volumes against London’s 30%. Following the blowout, the ratio stood at about 50% to 50%. Overall daily volumes traded in Moscow also slumped to $2bn (€1.5bn) from $7bn reached early in 2008.
Roman Goryunov, chief executive of the dollar-denominated RTS exchange, said March trading volumes indicated Moscow had won back territory ceded to London.
Goryunov said neither of the local exchanges had been suspended since the regulator introduced new rules on March 1 formalising trading halts and widening the corridors for market suspensions. Along with higher oil prices and a stronger rouble, the new rules had helped trading volumes to bounce back to pre-crisis highs.
In an interview with Financial News, Goryunov said: “Last month we saw the tendency had changed in Moscow’s favour with 70% to 30%.
“All of the problems last year caused the international investors to cease trading in Moscow in favour of London. The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left.”
Previously, trading was suspended until the next day if a share price fell more than 10%. Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of state development bank Vneshekonombank and state-controlled investment bank VTB Capital is believed to have buoyed local trading.
VTB, which manages Russia’s sovereign wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2bn, up 41% from $6.5bn in February.
The top seller of the month was state lender Sberbank with a monthly turnover of $31.3m. Energy company Gazprom had a turnover of $17.2m, followed by miner Norilsk Nickel with $15.7m. These three blue-chips accounted for 43% of total turnover.
The broker-dealers that handled the greatest trading volume in March were Russia’s Troika Dialog followed by Germany’s Deutsche Bank and local bank Renaissance Capital.
The RTS index was one of the world’s best performers in March after falling by over 70% from September last year through to February. It went up by 26.6% to 690 points as of March 31, against 545 points at the end of the previous month.
Jason Corcoran in Moscow
13 April 2009
Exchanges in Moscow have clawed back their lead in Russian equity trading over the London Stock Exchange after scores of suspensions and closures since last September sparked an investor exodus.
Investors turned to trading Russian global depositary receipts in London after the Micex and RTS exchanges were both suspended more than 30 times since September last year. Erratic trading patterns triggered shutdowns brought on by Russia’s war with Georgia, a banking crisis and investor scandals at miners Mechel and Uralkali.
Prior to the financial meltdown, Russian exchanges had 70% of equity trading volumes against London’s 30%. Following the blowout, the ratio stood at about 50% to 50%. Overall daily volumes traded in Moscow also slumped to $2bn (€1.5bn) from $7bn reached early in 2008.
Roman Goryunov, chief executive of the dollar-denominated RTS exchange, said March trading volumes indicated Moscow had won back territory ceded to London.
Goryunov said neither of the local exchanges had been suspended since the regulator introduced new rules on March 1 formalising trading halts and widening the corridors for market suspensions. Along with higher oil prices and a stronger rouble, the new rules had helped trading volumes to bounce back to pre-crisis highs.
In an interview with Financial News, Goryunov said: “Last month we saw the tendency had changed in Moscow’s favour with 70% to 30%.
“All of the problems last year caused the international investors to cease trading in Moscow in favour of London. The local investors who went quiet have become more active again and there are a large number of new investors to compensate for those who left.”
Previously, trading was suspended until the next day if a share price fell more than 10%. Under the new rules, it takes a 15% deviation to stop trading for an hour and a change of 25% to halt trading for the day.
The increased participation in the market of state development bank Vneshekonombank and state-controlled investment bank VTB Capital is believed to have buoyed local trading.
VTB, which manages Russia’s sovereign wealth fund, became the biggest trader of dollars on the Micex exchange in Moscow last month after the state development bank increased swap operations. The combined value of trading on the RTS exchange and over-the-counter activity rose to $9.2bn, up 41% from $6.5bn in February.
The top seller of the month was state lender Sberbank with a monthly turnover of $31.3m. Energy company Gazprom had a turnover of $17.2m, followed by miner Norilsk Nickel with $15.7m. These three blue-chips accounted for 43% of total turnover.
The broker-dealers that handled the greatest trading volume in March were Russia’s Troika Dialog followed by Germany’s Deutsche Bank and local bank Renaissance Capital.
The RTS index was one of the world’s best performers in March after falling by over 70% from September last year through to February. It went up by 26.6% to 690 points as of March 31, against 545 points at the end of the previous month.
Russian economy entices new investors
Financial News
Jason Corcoran in Moscow
06 April 2009
After the sell-off, hopes of good returns are rising
Like heroes inspired by the firebird of Russian folklore to undertake the most dangerous of quests, investors are returning to a resurgent Russian stock market in the hope of riches.
Norway’s $330bn (€249bn) state pension fund, one of the world’s largest sovereign wealth funds, last month awarded Prosperity Capital, the largest foreign fund manager operating in Russia, its largest mandate.
G2 Group, a Swiss family office, has taken large equity stakes in two Moscow investment firms, Da Vinci Capital and Diamond Age Advisors.
Swedish fund manager East Capital has increased its Russia weighting in its largest fund, the $500m east European fund, from 40% to 57%, the highest level in its seven-year life.
Karine Hirn, co-founder of East Capital, said: “Russia is extremely cheap now. It was by far the most oversold of the stock markets last year. In fact, the region of eastern Europe had 10 out of 20 of the most oversold markets in the world.”
Investor enthusiasm has pushed the RTS Index of leading Russian shares up 46% since its low point in late January. Higher oil prices, a stronger rouble and hopes that the international credit markets could soon be prised open for domestic issuers have helped improve investor sentiment.
But investors should bear in mind that, according to Russian folklore, while good fortune lies in store for whoever catches the firebird, trouble is normally close behind.
The Russian equities market has ruined investors twice in little more than a decade, with the RTS dropping 85% in 1998 and 75% last year, spurring investors to pull $290bn from the country between August and January this year, according to French bank BNP Paribas.
It was the combination of collapsing share prices and client withdrawals that forced Da Vinci Capital and Diamond Age Advisors to restructure themselves in the first place.
Alfa Bank co-founder Petr Aven last week warned that bad debts could reach 20% of total loans by the end of year, while finance minister Alexei Kudrin expects 10% in defaults.
Chris Weafer, chief strategist at banking group Uralsib, said: “The economy is still in decline and will need both a sustained rally in the demand for, and price of, commodities – plus a resumption of bank lending – to create new growth. These are more likely in the fourth quarter than in the second quarter, if they happen at all in 2009.”
East Capital’s asset managers said they are focusing on companies with low levels of debt, a strong market position and opportunities to benefit from sector consolidation.
Hirn said: “We are looking more at the balance sheets these days because there are financing issues that need to be resolved for many companies. We are happy to avoid real estate because the debt burden is heavy.”
Hirn said the firm’s east European funds had suffered a sharp fall in valuations since September but only suffered 10% in client redemptions. “We lost a huge amount in valuation in recent months but it was less brutal than 1998,” she said.
East Capital said Russia was still the strongest economy in eastern Europe with exposure to a large domestic market. It said countries dependent on exports such as Hungary and the Czech Republic are more vulnerable. Turkey and Romania also benefit from a strong domestic economy.
The manager last month launched a special opportunities fund to target assets in Russia and the Commonwealth of Independent States where valuations have declined sharply. The board of East Capital has agreed to put $50m in the fund when it launches during the second quarter of this year.
Moscow investment firm Da Vinci Capital also hopes to exploit cut-price opportunities in Russia through its new partnership with G2 Group, which manages $1bn in alternative assets.
Oleg Jelezko, managing partner and chief executive of Da Vinci Capital, said “Our strategy will be different now we are in recovery mode so we won’t need to pursue derivatives. It’s about using different asset classes such as bonds and special situations.”
Mattias Westman, chief executive of Prosperity Capital Management, said his firm’s Russian funds had received more interest from institutions in recent weeks.
He said: “Nothing very big, but it’s more constructive. We have endowments, pension funds and family offices considering further investment. Hopefully the Norwegians will help make Russia something that other major institutions feel more comfortable with.”
Flows into Russian equity funds hit a 19-month high in March, according to EPFR Global, a data provider that tracks funds. It said capital flows into Russian-dedicated funds rose from $7m in the week ending March 18 to $50m the following week.
However, inflows remain modest, as many investors are sitting on the sidelines waiting to see whether the rebound is just a bear market rally.
Angelika Millendorfer, head of emerging market equities at Austria’s Raiffeisen Capital Management, said: “So far our institutional and private investors are not returning to emerging markets. The relative performance of emerging markets has improved but investors are not yet making any substantial moves.”
Millendorfer said the big emerging markets funds and institutions continued to have low allocations to equities and to markets like Russia. She said: “I would be surprised if investors moved into emerging markets if the case for the developed markets does not return first. We need to have confidence that western banks will not collapse Lehman-style.”
Greater rouble stability and recent higher oil prices have been a major reason for domestic equity recovery but questions remain over the banking system, external corporate debt and the high level of inflation.
The biggest risk, partly because it cannot be quantified, relates to the level of non-performing loans in the banking sector and the future ability of big Russian corporates to pay or refinance the amounts they owe.
Jason Corcoran in Moscow
06 April 2009
After the sell-off, hopes of good returns are rising
Like heroes inspired by the firebird of Russian folklore to undertake the most dangerous of quests, investors are returning to a resurgent Russian stock market in the hope of riches.
Norway’s $330bn (€249bn) state pension fund, one of the world’s largest sovereign wealth funds, last month awarded Prosperity Capital, the largest foreign fund manager operating in Russia, its largest mandate.
G2 Group, a Swiss family office, has taken large equity stakes in two Moscow investment firms, Da Vinci Capital and Diamond Age Advisors.
Swedish fund manager East Capital has increased its Russia weighting in its largest fund, the $500m east European fund, from 40% to 57%, the highest level in its seven-year life.
Karine Hirn, co-founder of East Capital, said: “Russia is extremely cheap now. It was by far the most oversold of the stock markets last year. In fact, the region of eastern Europe had 10 out of 20 of the most oversold markets in the world.”
Investor enthusiasm has pushed the RTS Index of leading Russian shares up 46% since its low point in late January. Higher oil prices, a stronger rouble and hopes that the international credit markets could soon be prised open for domestic issuers have helped improve investor sentiment.
But investors should bear in mind that, according to Russian folklore, while good fortune lies in store for whoever catches the firebird, trouble is normally close behind.
The Russian equities market has ruined investors twice in little more than a decade, with the RTS dropping 85% in 1998 and 75% last year, spurring investors to pull $290bn from the country between August and January this year, according to French bank BNP Paribas.
It was the combination of collapsing share prices and client withdrawals that forced Da Vinci Capital and Diamond Age Advisors to restructure themselves in the first place.
Alfa Bank co-founder Petr Aven last week warned that bad debts could reach 20% of total loans by the end of year, while finance minister Alexei Kudrin expects 10% in defaults.
Chris Weafer, chief strategist at banking group Uralsib, said: “The economy is still in decline and will need both a sustained rally in the demand for, and price of, commodities – plus a resumption of bank lending – to create new growth. These are more likely in the fourth quarter than in the second quarter, if they happen at all in 2009.”
East Capital’s asset managers said they are focusing on companies with low levels of debt, a strong market position and opportunities to benefit from sector consolidation.
Hirn said: “We are looking more at the balance sheets these days because there are financing issues that need to be resolved for many companies. We are happy to avoid real estate because the debt burden is heavy.”
Hirn said the firm’s east European funds had suffered a sharp fall in valuations since September but only suffered 10% in client redemptions. “We lost a huge amount in valuation in recent months but it was less brutal than 1998,” she said.
East Capital said Russia was still the strongest economy in eastern Europe with exposure to a large domestic market. It said countries dependent on exports such as Hungary and the Czech Republic are more vulnerable. Turkey and Romania also benefit from a strong domestic economy.
The manager last month launched a special opportunities fund to target assets in Russia and the Commonwealth of Independent States where valuations have declined sharply. The board of East Capital has agreed to put $50m in the fund when it launches during the second quarter of this year.
Moscow investment firm Da Vinci Capital also hopes to exploit cut-price opportunities in Russia through its new partnership with G2 Group, which manages $1bn in alternative assets.
Oleg Jelezko, managing partner and chief executive of Da Vinci Capital, said “Our strategy will be different now we are in recovery mode so we won’t need to pursue derivatives. It’s about using different asset classes such as bonds and special situations.”
Mattias Westman, chief executive of Prosperity Capital Management, said his firm’s Russian funds had received more interest from institutions in recent weeks.
He said: “Nothing very big, but it’s more constructive. We have endowments, pension funds and family offices considering further investment. Hopefully the Norwegians will help make Russia something that other major institutions feel more comfortable with.”
Flows into Russian equity funds hit a 19-month high in March, according to EPFR Global, a data provider that tracks funds. It said capital flows into Russian-dedicated funds rose from $7m in the week ending March 18 to $50m the following week.
However, inflows remain modest, as many investors are sitting on the sidelines waiting to see whether the rebound is just a bear market rally.
Angelika Millendorfer, head of emerging market equities at Austria’s Raiffeisen Capital Management, said: “So far our institutional and private investors are not returning to emerging markets. The relative performance of emerging markets has improved but investors are not yet making any substantial moves.”
Millendorfer said the big emerging markets funds and institutions continued to have low allocations to equities and to markets like Russia. She said: “I would be surprised if investors moved into emerging markets if the case for the developed markets does not return first. We need to have confidence that western banks will not collapse Lehman-style.”
Greater rouble stability and recent higher oil prices have been a major reason for domestic equity recovery but questions remain over the banking system, external corporate debt and the high level of inflation.
The biggest risk, partly because it cannot be quantified, relates to the level of non-performing loans in the banking sector and the future ability of big Russian corporates to pay or refinance the amounts they owe.
VTB chief quells Gazprom bond hopes
Financial News
Jason Corcoran in Moscow
03 April 2009
The head of Russia’s state-controlled VTB Bank, Andrei Kostin, has told Financial News that energy giant Gazprom’s placing yesterday of a Sfr400m ($351m) Eurobond will not open the market for the wider economy.
Russia’s foreign banking debt amounts to about $500bn (€370m), with $130bn due to mature this year. Gazprom’s bond sale represents he first international corporate debt issue from the country in nine months.
Russian issuers are hoping the placement could help unlock the Eurobond market for other borrowers, who are currently engaged in restructuring negotiations with western creditors.
But Kostin, the chief executive of Russia’s second lender VTB, said he didn’t see the international bond market opening up beyond large oil companies.
In a Moscow media briefing, Kostin told Financial News: "Gazprom is on a roadshow at the moment. If it’s successful, it could lead to the opening of the international credit markets for Russian issuers. But I think it will only open for oil companies and it's too soon to see unsecured borrowing to take place for the rest of the economy. I don't see anything opening this year in terms of lending from the west."
Gazprom, Russia's most indebted company with consolidated outstanding debt of $60bn, last tapped the market in July 2008 with a $500m five-year bond priced at 7.51%.
Earlier this month, the Russian government warned it will not take on the debt burden of companies that are under stress, but will support their restructuring negotiations with lenders to ease funding pressure on the corporate sector and minimise debt defaults.
Bankers from VTB and Otkritie are involved in restructuring distressed companies in the financial and real estate sectors. VTB is set to take a 51% stake in London-listed Sistema Hals for $2 in exchange for cancelling the property developer's debt.
VTB and rival state lender Sberbank could become Russia's largest property portfolio owners as loan defaults increase and the banks are left with the collateral. However, banking insiders suggest they might have to wait five years to recoup their loans.
VTB, which last week took a 20% stake in Moscow brokerage Otkritie, is understood to be looking at banking targets in Wall Street and in Asia.
Kostin said VTB’s international expansions is continuing unheeded by the crisis. He added: "Now, we are opening in May in Kazakhstan where we had a meeting last week about getting a licence for our operations. We have a branch in Dubai opening in June which will report to VTB Capital in London."
Jason Corcoran in Moscow
03 April 2009
The head of Russia’s state-controlled VTB Bank, Andrei Kostin, has told Financial News that energy giant Gazprom’s placing yesterday of a Sfr400m ($351m) Eurobond will not open the market for the wider economy.
Russia’s foreign banking debt amounts to about $500bn (€370m), with $130bn due to mature this year. Gazprom’s bond sale represents he first international corporate debt issue from the country in nine months.
Russian issuers are hoping the placement could help unlock the Eurobond market for other borrowers, who are currently engaged in restructuring negotiations with western creditors.
But Kostin, the chief executive of Russia’s second lender VTB, said he didn’t see the international bond market opening up beyond large oil companies.
In a Moscow media briefing, Kostin told Financial News: "Gazprom is on a roadshow at the moment. If it’s successful, it could lead to the opening of the international credit markets for Russian issuers. But I think it will only open for oil companies and it's too soon to see unsecured borrowing to take place for the rest of the economy. I don't see anything opening this year in terms of lending from the west."
Gazprom, Russia's most indebted company with consolidated outstanding debt of $60bn, last tapped the market in July 2008 with a $500m five-year bond priced at 7.51%.
Earlier this month, the Russian government warned it will not take on the debt burden of companies that are under stress, but will support their restructuring negotiations with lenders to ease funding pressure on the corporate sector and minimise debt defaults.
Bankers from VTB and Otkritie are involved in restructuring distressed companies in the financial and real estate sectors. VTB is set to take a 51% stake in London-listed Sistema Hals for $2 in exchange for cancelling the property developer's debt.
VTB and rival state lender Sberbank could become Russia's largest property portfolio owners as loan defaults increase and the banks are left with the collateral. However, banking insiders suggest they might have to wait five years to recoup their loans.
VTB, which last week took a 20% stake in Moscow brokerage Otkritie, is understood to be looking at banking targets in Wall Street and in Asia.
Kostin said VTB’s international expansions is continuing unheeded by the crisis. He added: "Now, we are opening in May in Kazakhstan where we had a meeting last week about getting a licence for our operations. We have a branch in Dubai opening in June which will report to VTB Capital in London."
Subscribe to:
Posts (Atom)
Posts
