Sunday, February 15, 2015

Chris Weafer — Investors Are Cautiously Optimistic About Russia

But another reason why investors have become somewhat more optimistic about Russia risk is the better response from the Russian government since the start of the year and, with it, a better understanding of the country's real financial position.

For much of last year it seemed as if government agencies were doing no more than knee-jerk reacting to unfolding events and with more than a hint of a shell shock overlay. There was no evidence of a coordinated response to the worsening crisis and that added to the loss of investor confidence.
 
It seemed as if the only state strategy was to dismiss the sanctions and ignore the weakening indicators because oil revenues would save the day. The quick collapse in the oil price from early September came as a shock to the system. The spike in the benchmark interest rate at 2 a.m. on Dec. 16 smacked of panic and directly contributed to the 30 percent session volatility in the ruble market later that day. 
At the end of last year there was a real concern that the banking sector was heading for a crisis, which could then lead to a more serious collapse in the economy. There was also widespread reporting in the Western media that Russia was running short of money and might not be able to service its foreign debt obligations much beyond the end of this year.
All of which went largely unchallenged by the government, which has long since become notorious for not paying enough attention to basic public relations and image management. That consistent negative message reverberated though 2014 and was a major factor in the collapse in equities and debt prices.
 
But the long New Year's break seems to have had a positive effect on policymakers. They appear to have gotten their act together since the return to work in mid-January. It helps that the government does actually have the data to support a stronger message.The Moscow Times
Investors Are Cautiously Optimistic About Russia
Chris Weafer | senior partner with Macro Advisory, a consultancy advising macro hedge funds and foreign companies looking at investment opportunities in Russia

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