Foreign Investors Bullish on Russia But Concerns Grow

International fund managers are optimistic about the Russian investment scene -- but not without some concerns. Ansdell, Russia's leading financial communications consultancy, reports on a survey of portfolio investors.

London, (PRWEB) February 26, 2004 -- The February edition of The Ansdell Report reveals that 72% of foreign investors in Russia are positive about the investment outlook for the next 12 months, an increase of 18% on the survey conducted 4 months ago.

Their optimism is further indicated by 96% expecting an improving Russian market performance over the next 12 months, an increase of 24% over the previous poll.

They also expect investment opportunities to broaden away from over-concentration on oil, energy and extractive industries. Consumer goods and telecoms are cited as sectors to watch.

But behind the optimism lurk concerns. Almost half the fund managers surveyed report that, while positive, their underlying sentiment had worsened, rather than improved, over the past four months.

Currency movements are also centre stage, with most investors predicting a continuing strengthening of the ruble against the dollar.

With reference to the ongoing Yukos situation, again half those surveyed said that they believed that it could have a lasting effect on the Russian equities markets. Individual comments focused on the sanctity of property rights, and the selective application of the rule of law by the authorities.

"When we launched The Ansdell Report last year, we wanted it to become a bellwether of Russian sentiment. With the second survey we can now begin to track foreign investor opinion trends and focus on core issues," said Bill Stokoe, Ansdell Partner responsible for financial communications. "Some 68% of the fund managers surveyed said that they expect to invest more in Russia over the next 12 months. This is a big endorsement for the Russian market but President Putin needs to take note of their underlying concerns as he forms his next administration."

There was unanimous agreement that President Putin would be re-elected next month. But the jury of foreign fund managers is looking to see him maintain market-friendly, pro-reformist policies. They are certainly nervous about property rights and other aspects of corporate governance.

Progress on reforms was the most cited factor that would lead investors to increase their exposure to Russian equities.

Some respondents referred to expectations for a rising tide in Russian IPOs, starting later this year. A guest column by Christopher Granville, Chief Strategist, United Financial Group, pointed to improved fundamentals for domestic sector IPOs.

Intriguingly, there were mixed feelings about where such IPOs ought to occur -- London, New York or on the domestic exchanges.

A number of respondents also believe the Russian equities market has to be better organized, with more trading transparency and improved liquidity.

About The Ansdell Report:

The Report is an independent perception survey of foreign (non-Russian) fund managers investing in Russia. It is commissioned by Ansdell Associates and repeated every 4 months.

The survey participants represent just over one third of total foreign Russian portfolio investment, which currently amounts to around $14.3bn.

The survey is carried out for Ansdell by RD:IR, the London-based investor research agency.

About Ansdell:

Ansdell Associates, established since 1996, is the leading financial communications agency offering specialist IR and PR strategy and counsel to Russian-based businesses from its offices in Moscow and London.

Further information:

www.ansdell.ru

Bill Stokoe, London, +44 (0) 20 7431 7517, or bstokoe@ansdellconsult.com; or Alexander Goldin, Moscow +7 095 241 6199 or agoldin@ansdell.ru

For a copy of the research, in English or Russian, email: perceptions@ansdell.ru

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