Government plans to drive IPO to Russia

Brokers monitor market movements (AFP Photo / Ben Stansall)
As Hong-Kong has become number one IPO market, government in Moscow is worried fewer Russian companies are eager to run an IPO in the local market. The Federal Financial Markets Service (FFMS) is looking a solution by simplifying the IPO procedure.

Kommersant daily quotes the head of FFMS Dmitriy Pankin saying “It’s unpleasant for us that the number of non-residents willing to allocate Russian assets abroad have been increasing. In 2010-2011 the trend has gathered speed. It means the market leaves the Russian Federation and in fact issuers go abroad”.

Grigory Birg, the head of Investcafe analyst department, points out that in 2011 Russian companies ran 9 IPO on foreign markets against 1 Russian market IPO. The year before it was five IPOs abroad and seven on the domestic markets.

According to Offerings.ru in the first half of 2011 the funds attracted during IPOs made 38% of the income on the Russian stock markets. In 2010 Russian companies internal IPO income equals– 27% of total income.

To simplify the IPO process the FFMS is proposing to do away with some registration procedures in cases when companies are either very small or have got credit of trust. It hopes that would increase number of companies eager to work in Russia.

Grigory Birg agrees that the proposed changes by the FFMS will be an important step towards improving competition with western stock markets “that have a wider range of investors, more evolved infrastructure, more analytical information available and professional market makers”. He points out all these factors contribute to stock liquidity.

But then the analyst adds that the Russian stock market will still be inferior to the leading western ones, he says Russian market will be no radical changes in either number of the IPOs, nor the variety of investors.

Tom Mandy Otkritie analyst agrees that Russia stock market won’t be suited to IPOs until it turns into a big pool of liquidity, until it improves such aspects as the political situation, management of businesses, pension fund and others. “It’s a long-running project, it will take no less than 5-10 years for Russian market to reverse”, he adds.