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CAPITAL MARKETS

Russia: Bulls herald Russian corporate recovery

Equity markets tipped for growth; Concerns linger over structural reform

With a flurry of IPOs announced in the first two weeks of January, a promised $50 billion privatization programme in the offing and a proposed BP-Rosneft share swap making headlines mid-month, Russian capital markets have started the year on a high note. Yet some experienced Russia watchers are warning that, in the rush to call a tipping point in the country’s corporate sector, the lack of genuine structural reform might once again be being overlooked.

Undoubtedly there are grounds for optimism. Not only has the oil price – always an essential confidence indicator for Russia – been climbing steadily towards $100 a barrel but the latest round of deal-making comes on the back of a spate of successful transactions in the last three months of 2010, including the $912 million IPO of social networking company Mail.ru and PepsiCo’s $3.8 billion purchase of drinks producer Wimm-Bill-Dann (see Pepsi develops its thirst for Russian assets, Euromoney, January 2011).

With the tide of investor sentiment towards Russia apparently on the turn and many local assets – especially in the natural resources sector – still trading at a hefty discount to their emerging market peers, bankers are predicting a bumper year in equity and M&A.

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