As a frequent visitor to Russia, I was struck on my last trip in late November by the increased commitment of many leading Russian businesses to up their engagement with their western partners and stakeholders. There have been some high profile de-listings from the London Stock Exchange such as Uralkali and Polyus Gold. But the mood I encountered was overwhelmingly to reach out. Russia has many world class businesses and those I met recognise the longer term benefits of not pulling up the draw bridge in more difficult times.
How is this commitment to engagement manifesting itself? Capital Market Days (“CMDs”) in London have long been a feature of Russia’s blue chip businesses IR calendars, demonstrating as they do their commitment to governance, transparency and engagement with international audiences. CMDs are a major commitment involving as they do bringing the broader management team to London to set out their investment case in depth.
Hudson Sandler is the London market leader supporting Russian corporates in this area and attendance at the CMDs we have organised in Q4 has been better than ever, both in number and quality of buy and sell side attendees. Devaluation and import substitution have of course boosted the investment case of some major players. But there also seems to be a sense that tensions might at last be easing and that this is an important market to look at again with many world class businesses trading at big discounts. Expect the tempo of CMDs to rise further in H1 2016.
I also found that CEOs are now more than willing to engage with internatonal media, and tackle many of the sensitive issues that some assume they would be reticent about discussing. New York based media are perceived as being entrenched in an anti-Russian mind-set unlike those based in Western Europe. Our experience in London is that business journalists here still look at investor news flow as they always have done. Are management delivering and do the shares look like good value? No change here either. There is much positive coverage on those corporates that continue to engage with international commentators, including ‘BUY’ recommendations in some of the most important comment columns.
The mood outside the Boardroom in Moscow is more subdued with many professionals feeling the pinch of a devalued currency and rising inflation. So the restaurants and hotels are emptier, although offering much better value at some of the best venues in the world But there is also optimism that the fundamentals haven’t changed. Russia still has one of the best educated workforces in the world. Huge natural resources. A rising middle class that is demanding better services. The fiscal position is weaker, but still robust and with taxes low. So this is still a land of opportunity despite some well reported frustrations with aspects of the business environment.
Russia has faced many challenges in the past. Today, my impression is that the country is not turning in on itself. A new generation of talented business leaders (as well the some of the established titans) are keen to engage with their partners in London and New York as well as in Beijing and Dubai. This will be an important bridge as the broader political issues subside and we can all get back to business as usual.