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Are investors going to abandon Russia?

The foreign capital is flowing out of Russia and the risk of bankruptcy in this country is increasing. The experts foresee that in the following year the economy of this country will plunge into a recession.

The investors took away 13 billion dollars from the Russian market in the III quarter and in the whole 2014 – 85 billion dollars. Moreover, the Russian monetary reserves are slowly falling – they were at the level of 522 billion dollars in 2013.

 

Admittedly Russia is said to have still 370 billion dollars in monetary reserves but only less than 200 billion are in so called very liquid assets till the immediate sales – thinks Aleksander Jawień, chairman in Investment Fund Managers. – It is less than commitments of Russia and Russian companies which have to pay off them within next two years. Therefore, we may say that the situation is becoming more and more serious.

 

Russia derives 70 per cent of its income from sales of raw materials, mainly from oil and gas. Meanwhile, the sales of oil was significantly increased by the United States, contributing to its price reduction on the market from 110 dollars for a barrel to ca. 67 dollars according to the newest quotation. Additionally, the USA is announcing the increase in oil export in the following year and in two years – the beginning of the gas export.

 

It will cause increased gas prices in the United States, which of course will please the industry, and the major decrease in gas prices in Europe. It is not good news for Russia, its financial stability and possibility of deriving income from oil and gas – comments Aleksander Jawień.

 

The activities of the USA as well as the political conflict may result in the economic crisis in Russia, especially when the currency is dramatically becoming cheaper. We had to pay almost 33 rubles for a dollar last year and now – 20 rubles more. Russian companies have been practically cut off by those sanctions from the capital. It is worth mentioning that local indebted enterprises on the open financial markets on the amount of over 500 billion dollars in 2015, now have to pay off over 130 billion dollars.

 

Recently Morgan Stanley has decreased the economy prognosis from -0,5 per cent in 2015 to -1,7 per cent of GDP dynamics – reminds chairman in Investment Fund Managers. – This is not satisfactory information that is why it is difficult for me to imagine that someone would actually like to invest on the short-term in Russia on the basis of those negative flows of the capital. It results from a giant geopolitical risk and primarily from decreasing stability of Russian finances.

 

It may indicate considerable slackening of the investment growth in Russia. Its treasury securities are more and more risky assets and as the chairman in Investment Fund Managers points out – this country is out of the interest of reasonable investors.

 

Firstly, investors value the risk of bankruptcy in Russia on 20 per cent – states Aleksander Jawień. – As for the country which has recently enjoyed the esteem of investors – it is quite much. Secondly, ratings agencies will probably decrease the investment rating of Russia soon, which is the next signal of the lack of trust towards this country.


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