Global investors find Russia attractive to invest in


More than half of 500 global business leaders surveyed by AT Kearney plan to increase investments into Russia “significantly or moderately” during 2015 if the Ukraine conflict ends, sanctions are lifted and geopolitical tensions reduce, writes the Financial Times.

Despite the current situation, 50% of respondents still believe that Russia is an "appropriate" destination for investments.

A number of banks, including Coutts and Singapore DBS, note that stocks of the Russian companies are extremely cheap, and the price/profit coefficient is below the dividend yield, and this is a sign to buy securities.

In the context of low oil prices and weak ruble which has reduced the income of Russians in US dollar terms, "Russian exporters, especially in the materials sector, have their cash flow dynamics improved," said the emerging markets analyst at Pictet Asset Management Christopher Bannon.

However, according to the Foreign Direct Investment Confidence index calculated by AT Kearney, Russia wasn`t included in top-25 destinations for investment two years in succession. In 2011, Russia was ranked 11th, in 2005 - the 6th. However, since that time investors have redirected cash flow into the countries considered more reliable, such as Germany, Sweden and Italy.

According to FDI Markets, only 178 new projects totaling $13 billion financed by foreign investments were launched in Russia in 2014. Compare: in 2011 there were 396 projects totaling about $23 billion.

Analysts forecast

Russia "is not suitable for investments" due to uncertain economic prospects and "terrible" relations with the West, but investors are eager to continue doing business in the country keeping in mind the income that they have been receiving there for the last decade, says the emerging market analyst Timothy Ash.

Russian analysts disagree about whether the investment climate in Russia improves or not. "The second round of talks in Minsk in February 2015 gave us the hope that the worst of the conflict in eastern Ukraine is over," says chief economist at Norvik Bank Sergei Voloboev.

According to Director of Carnegie Moscow Center Dmitry Trenin, the only political partner which is able to help Russia attract capital and improve the state of the economy is China.

"The attitude to Russian as an investment environment in Asia is more positive than in Europe and America, which is less inclined to invest in the country," says AT Kearney partner Eric Petersen.

As it is expected, further fall in prices for Russian assets will encourage Asia to invest more. "Despite the fact that the Russian stocks and bonds are obviously cheap, there are scenarios according to which they can fall in price even more," says head of emerging markets research at UBS Wealth Management Costa Vayenas.

According to the forecast of the Swiss private bank Axa Investment Managers, the Russian economy will shrink by 6% in 2015. Sanctions do not allow the Russian corporations to raise capital in the USA and Europe, while the downgrading of their debt reduces demand of foreign investors, say experts of the bank.

Text and pictures by INTERFAX.RU