$1 billion inflow of funds to Russia since New Year
In the first week of February the inflow of global funds into Russian assets was $511million, exceeding the figure of $414million a week before. Last year the capital flow was mainly an outflow peaking in August at $1.5billion.
“We have seen the change of attitude because if you see how the Russian market has performed relative to the other markets around the world. We have actually outperformed significantly. Russia is up nearly 20% if you compare it to the US market, for example, which is up 7% and even MSCI emerging markets which has done closer to 12-15%. So clearly Russia has been clearly a hot spot and we continue to see more money flowing into the Russian market”, points out Takouhi Tchertchian from Renaissance Asset Managers.
According to EPFR Global, the main capital inflow in the first week of February went to funds working with the Global Emerging Markets (GEM) and BRIC countries – about $378bln.
“Capital inflow in such emerging markets as Brazil, India, China and Russia is the global trend that is likely to retain during the next decade. Russia has been showing rather good rate of investment inflow growth. Under favourable conditions, which are also defined by an inflow of overseas investment, in about 10 years Russia may become the locomotive for global economy growth”, says Anton Saphonov from Investcafe.
He says Russian assets will be attracting new investment in the short-term due to the number of positive factors in Russian politics and economics.
Mr. Saphonov believes the investment boost is because political risks are decreasing, Putin’s rating grows. “The capital outflow in the end of 2011 and first week of 2012 caused by protests has been corrected in January-February this year. The investment by local businessmen are back in the first place”, says Anton Saphonov.
The analyst also added that the trend is likely to remain at least during the first quarter 2012, as the Central Bank and Ministry of Finance forecast the inflow will increase in about six weeks.
“The Russian Government also announced that it was serious about diversifying from a gas and oil dependent economy. Investors expect the Russian economy to modernise, and if real measures are taken capital inflow will go on increasing”, adds Mr. Saphonov.
Russia economic figures have been encouraging lately believes Anton Saphonov. “Increasing oil prices contribute to the growth of the Russian economy and make it more attractive to investors. In 2012 the average Brent oil price has been $116 per barrel, during the year the price may reach $317. According to the official data, 2011 deficit/GDP ratio comprised 0.1%, in 2012 government expects the figure to be about 1.5%, in fact it may be less than 1%, and for instance, in January 2012 the deficit was at the level of 0.5%”.