1. What do you think is the condition of portfolio investment in Russia?

2. Why do you think Russians shy away from investment at home?

3. Do foreigners tend to invest long-term or short-term in Russia?

Alexei Devyatov

chief economist, Uralsib Capital

1. Historically, the Russian market follows global trends, which means that if the global economy is in good shape, then it is good for commodities and hence for the Russian market. The opposite is also true, so one should closely watch global macro trends when he or she thinks of portfolio investment in Russia. The global economy these days has substantial downside risks, which makes Russia a risky play.

2. If we talk about direct investment, then the key obstacle is a relatively poor investment climate, which means too much bureaucracy, poor property protection, and corruption. This makes doing business in Russia pretty risky. The goverment, however, is making an effort to improve investment climate via its Strategic Initiatives Agency. It is a bit early to judge what will come out of it, but hopefully we will see progress.

3. According to statistics, most foreign investment in Russia is short-term credits. Foreign direct investment is quite small – the risks associated with doing business in Russia are tangible. In addition, the No. 1 foreign investor in Russia is Cyprus, which makes one think that this is in fact Russia’s money coming back to Russia.

Hawk Sunshine

Director of portfolio investment IFC Metropol

1. I think the situation is not ideal. There are relatively few listed Russian companies and most are concentrated in the natural resources sector. On the other hand, the rights of portfolio investors have vastly improved over the last 10 years.

2. Not just Russians shy away from investment at home, but foreigners, as well. The principal factor that I would cite is that the global appetite for risk has decreased, as well as the fact that government regulations in many sectors are constantly changing, and even more importantly, they change in an unexpected and sudden way.

3. In global financial markets, I think that only long-term investing is possible. Markets are so dependent on the actions that politicians in Europe, China and the United States take, that there are only two possible strategies: inter-day trading and long-term investing based on a view of the global outlook. You can wake up in the morning with the announcement of a massive Chinese stimulus program, followed by an announcement of a European financial stability package and a reasonable U.S. debt reduction plan. Or the opposite could happen. Given this medium-/short-term uncertainly, investing long-term in publicly traded equities is the only choice.

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