Russian Stocks Cheap - Unable to Shrug off Yukos Effect - What Now for Russia's Equity Culture?

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The latest edition of the Ansdell Report on Russia Investor Sentiment is now available. Key findings include: 74% of investors are positive long-term on Russian equities but, perhaps unsurprisingly, the Yukos affair is keeping prices down.

The latest edition of The Ansdell Report, the sentiment survey of portfolio investors in Russia, suggests investors see Russian stocks as attractively cheap following the recent correction. Long-term confidence remains high with 74% holding a positive view.

But short-term concerns are clearly staying their hand as they wait to see if President Putins's government will ever provide greater reassurance over the sanctity or otherwise of property rights. Investors’ eyes remain firmly on the Yukos affair, and its impact on minority holders in the company. Satisfactory resolution of the Yukos issue was the most cited factor that would lead investors to increase their exposure to Russian equities.

"Our Report is published every four months and every period we've reported on has produced dramatic events that have influenced foreign investors' perceptions," remarked Bill Stokoe, Ansdell Partner responsible for financial communications. "This time it's the market correction and the deepening concerns over property rights. Somewhere along the line the latter, along with consistent application of the rule of law, both best evidenced by the Yukos affair, has returned to center stage."

Yukos had become somewhat semi-detached as an issue for investors, a localized spat, but now it's back there for foreign investors as the litmus test of the Russian authorities' true regard and recognition of the role played by portfolio investors in helping to drive up GDP. 74% of those surveyed believe the affair will have a negative impact on investment into Russia.

This time around, we have initiated coverage of Russia’s growing community of indigenous fund managers and investors. Their concerns broadly mirror those of the foreigners. What is apparent is that domestic investors are becoming a significant element, adding a useful level of additional liquidity to the Russian market. Nearly three-quarters of those surveyed see liquidity levels to be rising or stable.

There is a growing debate as to whether we will ever see a fully-fledged liquid equity market that fulfils the classic function of efficient allocation of capital. What are the prerequisites for an equity culture achieving full bloom in Russia?

Steven Dashevsky, Director of Research at Aton Capital Group, in a thoughtful contribution to the Report, cites a number of factors at work that have limited, for example, the flow of IPOs. These include – from an issuer's standpoint -- easy access to cheap debt, the regulatory burden and cost of listing, and reluctance to cede control -- and from the investors' standpoint -- the lack of choice beyond natural resource companies, general market liquidity, and abuses of property rights.

He says: "New issuers need to grow their businesses, streamline their corporate structures and operations, and develop a track record of solid operating and financial performance to prepare themselves (both externally and internally) for real entrance to the public markets."

The calls for greater transparency and better corporate governance remain a thread in each of our Reports to date. Investors want more Russian companies to get out more, for example, via 1:1s and roadshows, and for top management to be more accessible.

At the government level, investors want Putin to continue with his reform agenda, and to encourage diversification in the economy beyond the oil and gas sector.

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 is based on interviews with 27 fund managers, responsible for investment into Russian equities totaling US$6.92 billion, representing 15.5 % of the total capitalization of the FTSE Russian Index.

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 Russia-focused and internationally-focused Russian businesses from its offices in Moscow and London.

Visit the Ansdell site at

For further information:

Bill Stokoe, London, +44 (0) 20 7431 7517, or

Alla Solovieva, Moscow +7 095 241 6199 or

For a copy of the research, available in English or Russian, please email:, stating preferred language

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Bill Stokoe
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