While 2011 was a seriously down year for the emerging markets across the board — Russia being down less than other BRIC countries, the first quarter 2012 saw a dramatic rebound. Among the oil & gas companies Lukoil and Gazpromneft (the old Sibneft) were up 24%, Rosneft was up 19%, Tatneft 39%, TNK-BP 26% and Gazprom 27%. The price of oil remains strong, domestic demand is solid and, overall, commodity exports continue to generate positive earnings growth…On the other hand, stock market prices are slumping in this, the second quarter due to continuing concerns about the EU economies and growth in China.
Given the strong start this calendar year, there appear to be solid prospects for the Russian economy and stock market in 2012. Last year, the BRIC markets generally got crushed and the Russian market was down over 20% so that, today, the market P/E is about 5 making it the cheapest one in the Emerging Market space. At current prices, Russian stocks are a bargain relative to their international peers. The MSCI BRICs index is up 12.2% year-to-date, with an average gain in these markets of 12.9% . Both tallies are well above the 8.9% gain for the benchmark MSCI GEMs index so far in 2012. All of the BRICs markets are in the list of the top eight EM performers this year, Russia being up over 10%. Read more →
Global trade ministers on Friday approved Russia’s bid to join the World Trade Organization, giving Prime Minister Vladimir V. Putin a victory on the international stage at a time of rising domestic opposition to his hold on power.
The Nigerian trade minister, Olusegun Olutoyin Aganga, struck a gavel to announce that the W.T.O. trade ministers’ meeting here had accepted the bid. Because the organization operates by consensus, Russia had to first reach bilateral agreements with 57 of its current 153 members to secure their support.
“This result of long and complex negotiation is favorable both for Russia and for all our future partners,” President Dmitri A. Medvedev said in a statement read to the conference by the first deputy prime minister, Igor I. Shuvalov. He called on world leaders to continue working for freer and fairer trade, adding: “Russia is ready to contribute as much as possible into this work.” Read more →
Russia’s accession to the WTO cleared a major hurdle when the WTO Working Party on its accession approved, ad referendum on 10 November 2011, the package spelling out Russia’s terms of entry to the organization. The Working Party will now send its accession recommendation to the 15 —17 December Ministerial Conference, where Ministers are expected to approve the documents and accept Russia as a WTO Member.
On 10 November 2011, the Working Party on Russia’s accession, chaired by Ambassador Stefán Jóhannesson (Iceland), agreed, ad referendum, on the terms of the country’s membership to the WTO by adopting the package containing reforms to Russia’s trade regime, and the commitments that Russia undertook to implement as part of its WTO accession. Read more →
This article was written by Anna Andrianova for RUSSIA: BEYOND THE HEADLINES on November 3, 2011
Russia is aware of the damage its reputation is inflicting on the country’s ability to attract foreign direct investment and trade partners, according to Deputy Minister of Economic Development Stanislav Voskresensky.
In his keynote address at the recent Russian Business Investment Summit (RBIS) in New York, Voskresensky stated that the Russian government knows that the country’s dependence on commodities coupled with the widespread belief that it has an unfavorable business climate has hindered its economic growth,but that the government is working to improve the climate as well as the perception.
Another barrier to trade has been the country’s exclusion from the World Trade Organization (WTO), although that may be about to change. Just as the business summit opened in New York, it was announced that Georgia had reached an agreement clearing the way for Russia’s WTO membership, which observers say will jumpstart trade and investment.
“It will be a surprise to everybody when in a few years Russia will move into the world with its young management and its world-class companies. Russian companies will do very well internationally,” said John Conner, a portfolio manager at Richmond-based Third Millennium Russia Fund (TMRFX) who attended the RBIS conference. He added that Russian steel companies are already entering the world market, and that Russian oil companies will be next. Read more →
Last week, Russian Prime Minister Vladimir Putin launched a major pipeline that will start pumping gas to Western Europe as soon as next month. With the click of a computer mouse in front of flashing cameras, Putin opened the valve to let the gas into the first Nord Stream pipeline at the Portovaya compressor station at the Russian-Finnish border. Read more →
From June 16 to June 18, the St. Petersburg International Economic Forum (SPIEF) was held for the 15th consecutive year in St. Petersburg. SPIEF was first held from June 18-20, 1997 as a forum with the support of the Inter-parliamentary Assembly of CIS Member States and with support of the Russian Government. That first conference was attended by over 1,500 people from 50 countries and during that first forum, the governments of Belarus and Russia signed loan agreements totaling RUB 500 million. The second conference was held the following June and had around 2,600 participants, including representatives of 36 major international organizations, and leaders of CIS member-states. During the second forum, around 700 investment projects were decided on, and 52 agreements and protocols on investments totaling approximately USD 1 billion were signed. Today the conference has grown drastically; in 2010, 87 countries were represented by around 4,200 delegates, including President Medvedev, 3 international heads of state, and 4 prime ministers. Also at the 2010 forum, 47 investment agreements were signed with a total value of approximately RUB 338 billion, including 18 investment contracts totaling RUB 275.6 billion. Read more →
Even though the multiple of the Russian stock market has recently increased from 7 to 8 as a result of strong performance, Russia remains one of the cheapest markets in EM space, based upon 8.1 forward looking P/E as compared to 11.6 EM overall and 11.7 for BRIC countries.
Russia’s macro-economic track record is strong and it is enjoying its lowest levels of inflation while maintaining a 2% of GDP budget deficit. Estimates for 2011 economic growth have an increase from 5% to 6% with the possibility that the fiscal deficit may be eliminated altogether despite the fact that we are now in a political year with national legislative (State Duma) elections this December and Presidential elections in March 2012.
Russia has enjoyed improved relations with The West — Europe as well as the US. And China relations are excellent; Russia is poised to benefit from any Yuan strengthening and growing domestic demand there (see “View Towards China” below). And the dedication of the huge, new Kavikta gas field in Eastern Siberia to pipe down through The Altai to China portends substantial flows for the foreseeable future into China. Read more →
There is turmoil everywhere it seems and concerns abound about the dependability of our oil supply, but the world’s biggest oil producer is quietly moving forward in a steady, stable growth projectory.
The Russian economy grew in 2010 at about 4%, a dramatic down from its yearly 6% rate in most of the first decade of the new century, but dramatically up from the trough of 2008. This year, projections were recently upgraded to 5%, even 6%. In addition to restored consumer demand domestically, China’s continuing appetite for what Russia exports (and the rest of south and east Asia), is a demand pull for steel (SEE Novolipetsk (Ticker: NLMK); Severstal (SVST) and Mechel (MTL)), fertilizer (SEE Uralkali (URKA)), as well as oil (Lukoil (LUKO); Rosneft (ROSN) and Tatneft (ATAD) and gas (SEE Gazprom (OGZPY) and Novatek NVTK)). Coking coal, iron ore, grain (although the harvest was lower due to the vast fires last summer), copper, nickel and PPG metals (SEE Norilsk (MNOD)) round out the offerings of the world’s largest commodity exporter.
Russia is now a $1.6 trillion GDP, #8 in the world. Its private sector constitutes 65% of total GDP, although no one seems to believe it. That includes the oil sector which is about half private in terms of output. Ironically, that percentage falls when measuring market cap since a greater risk discount is imputed to the private companies than those still state managed (which also welcome substantial investor participation). Read more →
One of the key components of Russia’s dramatic growth so far this century has been its exports to China and the other growing economies of south and east Asia. So keeping tabs on Russian exports of steel, fertilizers and, of course, oil is important in assessing future earnings of Russian public companies.
China is planning construction of more inter-regional highways by two times than the entire length of our Interstate Highway System in the next 20 years… That’s “re-bar” steel. The high rise construction in Chinese cities continues unabated… That’s “long” steel. And China has been producing 50% more autos every year… that flat rolled steel.
It is true that China is the largest producing steel economy, but it still imports much and, in fact, due to environmental concerns, has been shutting down some of its antiquated, polluting older plants. Read more →