ST PETERSBURG, Russia - President Vladimir Putin will court investors this week at Russia's answer to Davos, but one who will not be attending is Steven Dashevsky, a fund manager who is looking at diversifying away from the country.
Once optimistic about Russia, Dashevsky, who manages a $100
million hedge fund, has little hope for a new round of
investor-friendly economic reforms.
He has been disappointed by the lack of progress in the past
few years and is not expecting any change after Putin’s
inauguration for a new six-year presidential term in May.
“Talk is cheap – there’s nothing they have done in terms of
real market reforms or real liberalisations,” said Dashevsky,
founder and chief investment officer at Dashevsky & Partners.
“There have been so many false starts and so many missteps
and so many missed expectations that investors’ patience is
wearing thin.”
The St Petersburg International Economic Forum will be
Putin’s first face-to-face meeting with major investors since
his re-election in March, a meeting which offers him a platform
to showcase his plans for the next six years.
With Russian markets badly underperforming their emerging
markets peers, it will be a tough sell for Putin, but aides say
the tide of money leaving the country has more to do with
Europe’s debt crisis than any home-grown problems.
“European banks are closing their business all over the
world to save themselves,” Stanislav Voskresensky, Russia’s
deputy economy minister and the main organiser of the meeting,
told Reuters.
Putin, Russia’s paramount leader for the past 12 years, will
be at the three-day forum only for one day, following his trip
to a Group of 20 summit in Mexico and preceding a visit to
Israel.
LESS TALKS, MORE ACTION
He is due to meet prospective investment partners who
between them manage $1 trillion – such as TPG Capital’s
David Bonderman, Apollo’s Leon Black, China Investment
Corp’s Lou Jiwei and Kuwait Investment Authority’s Bader
Mohammad Al-Sa’ad – a source familiar with the forum plans said.
Those investors sit on the international advisory board of a
state-backed fund that is seeking to drum up investment into
Russia by private-equity investors and sovereign wealth funds.
The board of the Russian Direct Investment Fund will hold
its inaugural meeting in St Petersburg’s Stroganov Palace on
Wednesday to discuss progress and ways to improve Russia’s
investment climate.
“Investors are looking for growth stories, and Russia is a
growth story with attractive valuations,” said Kirill Dmitriev,
CEO of the fund, in emailed comments.
“The macroeconomic backdrop is rock solid – low debt, low
unemployment, a balanced budget, a growing middle class. That
looks phenomenal if you are sitting in Europe and looking east.”
While Russia bulls and officials point to an improving
economy and increasing foreign direct investment, sceptics say
they want to see less talk and more action on privatising state
enterprises, stemming capital outflows and tackling corruption.
They also want to see real progress on diversifying the
energy-reliant economy.
The government has said it wants to privatise a number of
state-owned assets but that effort has stalled with sale of a
stake in Russia’s Sberbank still awaited.
“In the aftermath of the election, I think people want
confirmation that the new government will push ahead with
liberal reforms, that will be the overriding demand from
investors,” said Peter Westin, chief economist at Moscow
brokerage Aton.
While Russia wants to improve the investment climate, BP
, one of the biggest foreign investors, has announced it
will sell its $30-billion stake in its profitable but
conflict-ridden Russian oil venture TNK-BP.
STOCKS, ROUBLE
The market has not reacted positively to Putin’s return.
Russia’s IRTS stock index is down 32 percent since
Reuters quoted sources as saying last July that he would seek a
return as president after four years as prime minister.
In the past seven months, Putin, 59, has faced the biggest
protests since he first rose to power in 2000, with tens of
thousands of people taking part in some of the demonstrations.
Russian stocks have underperformed prices for its main
export, oil, with Brent crude oil futures down by 16
percent over the same period. Emerging markets stocks
are down 18 percent. The rouble has weakened 12.4 percent since
its 2012 highs of 29.03 roubles to the dollar in February.
“Generally, the news from Russia over the last 12 months has
been nothing or negative and it’s the first opportunity for the
government to draw a line under that and announce the next
phase,” Chris Weafer, chief strategist at Troika Dialog, said.
Net capital outflows also continue unabated – Russia saw
$46.5 billion in capital flight in January to May, more than
half the $80 billion during the whole of 2011.
Held during the northerly city’s White Nights when the sun
does not set, the St Petersburg forum is an event that few
bankers or CEOs interested in Russia can afford to miss. Deals
and initiatives are also typically announced at the event.
Putin has urged Gazprom’s partners in the vast
Shtokman gas field to make a final investment decision on its
plan to extract gas from the Arctic seabed, and signalled there
could be progress at the forum.
Delayed by years of talks over financing, the project is
expected to announce it has gained a new investor in Royal Dutch
Shell.
