Which Rus­sian com­pa­nies could ben­e­fit from sanc­tions?

Financial Mirror (Cyprus) - - FRONT PAGE -

In­vest­ment in Rus­sian stocks brings ad­di­tional risk be­cause of the sanc­tions im­posed by the U.S. and the EU, ac­cord­ing to re­search an­a­lysts at Mor­gan Stan­ley and Deutsche Bank. How­ever, they say that the new sanc­tions against Rus­sian state-owned com­pa­nies will give pri­vate play­ers – pri­mar­ily par­tic­i­pants on the con­sumer goods and IT mar­kets – a chance to at­tract in­vestors.

Ac­cord­ing to Mor­gan Stan­ley, the new sanc­tions came as an un­pleas­ant sur­prise for in­ter­na­tional in­vestors. Since the pu­ni­tive eco­nomic mea­sures were di­rected against ma­jor pub­lic com­pa­nies and banks which are largely in­te­grated into the global mar­ket, an­a­lysts sug­gest that in­vestors will take a cau­tious stance.

Among the rea­sons cited by the re­searchers in sup­port of this the­sis are un­cer­tainty and the pos­si­bil­ity of ad­di­tional sanc­tions. In turn, Deutsche Bank said fi­nan­cial and and gas com­pa­nies may feel se­ri­ous

oil pres­sure in the short term, which will in­crease cap­i­tal out­flow and raise bor­row­ing costs for Rus­sian com­pa­nies.

“Cer­tain Rus­sian com­pa­nies have ac­tu­ally been sub­ject to rigid ex­ter­nal fi­nanc­ing terms for the last sev­eral months, but be­cause of the new sanc­tions, these re­stric­tions will be le­gally bind­ing,” the re­port said.

“Com­pa­nies with the clos­est ties to the govern­ment are ex­pe­ri­enc­ing the most pres­sure, while there seems to be no oc­ca­sion to sell shares in pri­vate com­pa­nies. How­ever, when Sber­bank and Gazprom shares be­gin to fall, the over­all mar­ket will also move down­ward, which will drag down the largest pri­vate com­pa­nies in Rus­sia,” said An­ton Soroko, an an­a­lyst at in­vest­ment hold­ing Fi­nam. Ac­cord­ing to macroe­co­nomic an­a­lyst at UFS IC, Vasily Ukharsky, there has been another drop in fore­casts for the Rus­sian mar­ket due to the third pack­age of U.S. sanc­tions, the down­ing of the Malaysian air­liner, and the grow­ing con­flict in south­east Ukraine.

“If we talk about the sec­tors that are still at­trac­tive for in­vest­ment de­spite the neg­a­tive eco­nomic con­di­tions and the de­te­ri­o­rat­ing busi­ness cli­mate, they are the con­sumer, tele­com, and IT sec­tors,” an­a­lyst Timur Nig­mat­ullin.

For ex­am­ple, he said that the com­pa­nies most pro­tected from sanc­tions are those such as the coun­try’s largest food re­tailer Mag­nit, mo­bile op­er­a­tor Me­gaFon, which is con­trolled by Rus­sia’s rich­est man Alisher Us­manov, and Yan­dex, the na­tional search en­gine that has man­aged to beat Google on the Rus­sian mar­ket.

Deutsche Bank an­a­lysts cite sev­eral com­pa­nies whose shares will also be able to of­fer a haven for in­vestors in Rus­sian stocks

said

In­vest­cafe dur­ing a pe­riod of height­ened geopo­lit­i­cal ten­sions. These in­clude the oil com­pa­nies Tat­neft and Bash­neft and me­tal­lur­gi­cal com­pany Evraz.

Ac­cord­ing to Ukharsky, pri­vate com­pa­nies look much more at­trac­tive than state-owned com­pa­nies. How­ever, the ex­am­ple of No­vatek (the largest pri­vate gas com­pany in Rus­sia, which is in­cluded in the U.S. sanc­tions list) shows that there are no guar­an­tees.

How­ever, as head of the an­a­lyt­i­cal de­part­ment at in­vest­ment com­pany Golden Hills-Cap­i­tal AM, Natalya Samoilova, notes, sanc­tions pro­duce no win­ners.

“If the sanc­tions are not lifted, it would mean a blow to the Rus­sian econ­omy, and un­der such cir­cum­stances it makes no sense for for­eign in­vestors to seek refuge in any other Rus­sian as­sets,” the ex­pert said.

Ac­cord­ing to Samoilova, this case will most likely only in­crease cap­i­tal out­flow and lead to a more rapid tran­si­tion to eco­nomic re­ces­sion.

On the other hand, if the re­stric­tions were to be re­moved in the next six months, the vic­tims of the sanc­tions will be the most promis­ing play­ers. First in line is the largest oil pro­duc­ing pub­lic com­pany in the world, Ros­neft.

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