An improvement in global market conditions is the only way to bring investors back to Russia and other risky markets, says BNY Mellon.
So it is not the company fundamentals that are pushing investors away from Russia. Marshall is convinced the main trigger is the uncertainty in other global markets, notably the crisis in the Euro zone and the threat of the fiscal cliff in the US.
The victory of Barack Obama in the US elections yesterday is a positive development for Russia, but much still needs to be done to stabilise the markets.
Until this happens, risk appetite is unlikely to return to investors, and subsequently fund allocators can be expected to stay away from Russia and other risky markets.
Marshall says: “It is not necessarily something that Russia needs to do to attract investors. There is simply more stability needed in the developed markets.”
BNY Mellon is active in the field of depositary receipts in four countries in the Russia and CIS region. Apart from Russia, it has seen strong business in Kazakhstan, Ukraine and Georgia.
“We would like to see more former Soviet Union states coming to the market, but this hasn’t happened so far,” Marshall said.
As a result, there are no operations in countries such as Tajikistan, Kirgizstan or Azerbaijan for the time being.
One market that has stood out recently is Mongolia, where a number of large privatisations are planned for the coming year. The Mongolian Stock Exchange has signed a strategic alliance with the LSE early last year.
In the coming year, a large coking coal mine is preparing for a listing on the LSE and Hong Kong Stock Exchange. This would be the first cross border listing from Mongolia, representing a compelling opportunity for a provider such as BNY Mellon.
The privatisation programme in Russia is also likely to provide new opportunities in the coming year, both for service providers and investors.
However, Moscow is not prepared to sell off state assets at low prices, so the development will depend directly on the global market conditions.