THE RUSSIAN INVESTMENT story right now is one of stark opposites. In foreign direct investment all seems remarkably rosy. The government's 7% stake in LUKoil looks set to be bought by Conoco. In consumer finance, GE Capital, BNP Paribas and Société Générale have all made recent acquisitions. UBS also recently bought out Brunswick, its Russian brokerage partner.
The story is very different in portfolio equity investment where, despite Russia's having some of the strongest macroeconomic fundamentals in Europe, several large foreign institutions are scaling back their positions. Analysts at the Moscow brokerage houses have been wondering if the Yukos affair will affect investors' broader assessment of Russian risk. The answer seems to be yes.
Michael Reynal is portfolio manager at Principal Global Investors, which has over $500 million invested in emerging-market funds. He says: "All the negative news coming out of Russia has definitely affected our assessment of the country's...
