Troika Dialog, the oldest and largest private investment bank in Russia / CIS, has unveiled in a note that "political sanity" could be key to obtaining a sustainable markets rally over the next month.
However calls for "political sanity" are targeted at European politics and not the Duma elections (emphasis ours):
Political sanity can drive markets higher this month.
After last week's global market euphoria, the hope is that events this week can validate the return of optimism and sustain a market rally across the Christmas and New Year period.
Whether that is possible or fails will principally depend on Europe's politicians and China's growth indicators.
Both will come to a head on Friday.
Before that, [December 6] meeting between the German and French leaders will set the tone ahead of the EU leaders' meeting on Friday. Commentators in the weekend media were equally split as to whether the proposed actions are ambitious enough or are even politically possible.
But most agreed that the right comments from politicians this week could push asset prices a lot higher through December.
The Duma election has caused controversy around the rest of the world.
Essentially, the Duma electorial system works like this (courtesy of The Levada Center Moscow):
Initially the Duma term was four years.
Constitutional amendments passed in December 2008 mean that it is extended to five years to take effect after the 2011 Duma election. Calling the next election is the responsibility of the president.
The 450 seats in the Duma are assigned exclusively from party lists under a law adopted in 2005 on the initiative of President Putin. He claimed it would strengthen the party system by reducing the number of parties in the Duma (cf. public opinion on reform). The chief features of the law are:
All seats are awarded by proportional representation. The threshold for eligibility to win seats is 7.0 percent. In 2007, three parties represented in the previous Duma passed this threshold--United Russia, the Communist Party and the Liberal Democrats, as did Fair Russia, largely based on Motherland in the former Duma. Together, these four parties won around 90 percent of the vote.
At the initiative of President Medvedev, in spring 2009 the Duma passed an amendment which would allocate one seat to parties winning between five and six percent of the vote, and two seats to parties winning between six and seven percent. This allocation would occur before distributing seats to parties passing the seven percent threshold. There were no parties winning between 5% and 7% in 2007.
Only officially registered parties may compete, and registered parties cannot form a bloc in order to improve their chances of clearing the 7.0 percent threshold. There were 11 parties contesting in 2007 and there are 7 parties contesting in 2011. The current list of registered parties is updated periodically by the Central Electoral Commission.
Duma seats are allocated to individuals on the lists of successful parties in accordance with their ranking within them. Any members who change their party automatically forfeit their seats.
The 225 single-member districts are abolished. I
n 2003 100 of these seats were won by independents or minor party candidates.
Only late yesterday, U.S. Secretary of State Hillary Clinton said:
The Russian Duma elections held on Sunday were "neither free nor fair"
According to the Chinese government owned newspaper, Xinhua, Russia responded with:
The Russian Foreign Ministry said Russia expects the U.S. side to refrain from unfriendly statements running counter to the general positive vector of the bilateral ties.
"We have to state with regret that Washington sticks to the long gone stereotypes and labels without trying to find out what is really going on in our electoral field," the ministry said in a statement.
"Russian citizens made their choice and took active part in the ballot. Only they have the right to determine the country's future regardless of anyone's biased opinions and politicized recipes," it said.
The ministry also noted that the U.S. electoral system can also hardly be considered "a paragon of openness and fairness".
Russian President Dmitry Medvedev Tuesday also slashed Washington's criticism on the Duma election, saying the political system is Russia's internal affairs.
"If they observe elections and find violations, that is one thing. But the issue of Russia's political system is not their business," he said.
While Troika Dialog has acknowledged that the Duma election is close to a consensus, it does say that (emphasis ours):
News from Europe will be the main driver of the Russian markets .... even as the news of the Duma election result will dominate the domestic headlines.
With the full voting results now counted, United Russia has held onto an absolute Duma voting majority, albeit just barely.
That was the consensus expectation among investors, so it should have little direct impact on where Moscow's bourses and the ruble trade........
Yes - European risk is a focus but stronger markets are expected:
Europe to dominate 1Q12 but strong market is expected.
It is not surprising that our view of the expected market trend over 1Q12 is dependent on how the events in Europe unfold.
Over the course of the year, we expect the RTS Index to end near 2,200, or 30% better than Friday's close, but the chance of further weakness is also outlined based on Europe risk.
- Euromoney Skew Blog