DAVOS, Switzerland: What a difference a year makes.
Twelve months ago, the mood of the Russian delegation at the World Economic Forum in Davos was distinctly gloomy, with oil prices near 12-year lows below $30 per barrel and Western sanctions depressing their economy and financial markets.
Since then, however, Russian stock and bond markets have risen about 50 percent, boosted by rebounding oil and – more recently – expectations the new U.S. presidency of Donald Trump will ease the sanctions imposed over Moscow’s actions in Ukraine.
Russian officials and company executives at the forum attended by the world’s political and business elites in the Swiss Alps this week were far more bullish, with many predicting the markets rally would continue this year.
“This is one of the most positive forums in the last few years. Today our Western counterparties – bankers and investors – can talk freely again about investments in Russia,” Andrei Guryev, chief executive of fertiliser giant PhosAgro, told Reuters on the sidelines of the forum.
Russia’s economy is still in the early stages of a recovery. There are however promising signs after more than two years of pain. Oil – a crucial source of revenue – has bounced back above $50 and Russian manufacturing expanded at its fastest pace since 2011 in December, a sign the economy is starting to grow again.
And then there’s the Trump factor.
The U.S. real estate mogul won the U.S. election on Nov. 8 after a campaign that included pledges to improve ties with Russia, and this week – days before his inauguration as president – he proposed offering to end sanctions imposed on Russia over its annexation of Crimea in return for a nuclear arms reduction deal with Moscow.
“The easing of sanctions will reopen cheap foreign capital markets again for Russian companies,” Guryev said. “It will stimulate local business, allow the central bank to cut interest rates and as a result spur Russia’s GDP growth.”
He said the lifting of sanctions could remove the 20-40 percent share price discounts on listed Russian companies that he said the punitive measures had led to.
The head of Russia’s state Direct Investment Fund, Kirill Dmitriev, said corporate gains could be even steeper.
“We know that after past crises the Russian stock market was bouncing back by several times. There is potential for growth by another 50 percent and more and it is not necessarily linked to the easing of sanctions but also to economic growth,” he said. Read more…..
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