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Markets applaud election outcome

Financial markets are rejoicing at the resounding victory by President Putin's United Russia Party in the country’s parliamentary election. The stability is seen as a positive by the market observers.

“The United Russia Party’s victory is a crucial factor for the Russian stock markets in December. I predict that Russia's RTS index will get a boost over the next few weeks, to end the year at around 2,300 to 2,500 points,” forecasted Aleksandr Razuvaev, the head of research at Aobinbank.

The parliamentary election became a referendum on President Putin's policies.

And economic stability has become one of the hallmarks of his tenure, with the World Bank saying Russia has achieved “unprecedented macroeconomic stability”.

“His role has been identified and interpreted by investors over the last 7-8 years as being a kind of moderator, almost like a referee, between the different factions in the Kremlin,” reminded Chris Weafer, the chief strategist at Uralsib Financial Corporation.

Russia now boasts strong GDP figures, estimated at around 7.5% for this year, has paid off a significant part of its foreign debts, and built up reserves of almost $US 450 billion.

However the country's main selling point as an investment destination is one the government cannot control – the price of oil.
One of the world's leading exporters, Russia's been enjoying a decade of growing prices. But what goes up, at some point must come down.

“Investors will stay away from Russia if they think the oil price is going fall and if the earning potential for Russian companies, particularly oil companies, is not strong,” warned Tom Mundy, strategist at Renaissance Capital Group.

Erik Depoy, Equity Strategist at Alfa-Bank, said the reaction of the West should be muted as they realise that Putin is extremely popular president in Russia.

“You cannot say this result was manipulated or preordained. The West realises that it is best to keep their criticism muted for the time being.”

Aleksandr Kotchubey, managing director of Renaissance Investment Management, said the election result does not indicate how the 2008 presidential election will pan out.

“The West was saying: wait a second, we thought this was to clarify and create some kind of expectation in terms of the future and it does exactly the opposite.”