RUSSIA - Uncertainty currently surrounds the Russian political situation with parliamentary elections due in December this year followed by presidential elections next March.
But this is not a cause for concern, according to Tibor Schindler, chief strategist for central and eastern Europe at Raiffeisen Capital Management, as Putin is almost certain to be returned.
“Political uncertainty will subside and economic common sense will prevail,” said Schindler.
Fears that Russia might suffer the same fate as Argentina, which failed to recover from its debt crisis, were discounted because of Russia’s oil-generated wealth. Though there have been fears about the collapse of oil prices, particularly with the prospect of Iraqi oil hitting world markets at some stage, in fact prices have moved higher.
“The supply and demand picture is very favourable,” said Schindler.
“Iraq’s oil will take time to come on stream.”
Talk of a possible US stake in Russian oil are so far just rumours, but a distinct possibility.
Other favourable factors are the flow of money back into the country from Russians who previously moved it offshore, and the end of the drain of capital from the domestic economy.
Schindler was extremely optimistic on the Russian outlook: “I can’t give any fundamental negative news,” he said.
So far this year to mid-October, Raiffeisen’s CEE equity fund has posted returns of 48%. In six out of the last eight years the Russian equity market’s performance has been in the top four.
Stephen Jennings chief executive office of Moscow-based Renaissance Capital, was also positive about prospects for Russia, though he was less sanguine about the outlook without reform.
He highlighted pressing structural problems, a relatively undeveloped small and medium enterprise sector and a bloated bureaucracy as areas needing to be tackled.
“The big issue is whether growth will be 6-8% or 2-3%,” he said.
“Without reform, growth is more likely to be 2-3%.”
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