1 июня 2016 г.

The CFA Association (Russia) held a business breakfast dedicated to analyzing the effects of macroeconomic and political shifts and risks for the Russian market

On June 1 at the Kazan Bar, the CFA Association held a business breakfast on the theme “Effects of macroeconomic and political changes on asset management: risks in the Russian market”. Sharing their views on the country’s present and future were Business New Europe editor and publisher Ben Aris and founding partner and chairman of the research firm GaveKal-Dragonomics and GaveKal Research Limited, Charles Gave.

Ben Aris spoke about how, unlike all previous crises that Russia has faced, the current crisis is one of the most painful: the upsets of 1998, 2004, 2008 affected mainly the stock market, but now the problems have “come out” into the streets, affecting the ruble and therefore every one of us. Salaries in the country have contracted for the first time in many years and have become lower than in China.

Among the main dangers and risks Aris pointed to stagnation. As he explained, “For an economy in a transitional period, investments should grow by 20–27%, which did happen in 2006 and 2007 in the boom period, so it is extremely important now to avoid stagnation. He furthermore noted that the economy is doing better than everyone expected. Thus, last year there was a banking crisis, but we didn’t notice it. Accordingly, politics have come to the forefront. “In 2005, during the boom, we let opportunities for structural reform pass us by, as we were drunk on oil, and now we are simply forced to apply them,” he said.

Aris suggested that Russia’s strength lies in its population. “MTC is the biggest telecommunications company in Europe. Yandex is the biggest search company in Europe. Everyone thinks that this is an oil country, but I consider it a consumer market. Russia is number one in sales of children’s toys, automobiles, milk, and many other goods. Of course, the crisis has led to some adjustments, but we hope that the sanctions will be lifted in six months.” Aris believes that under Vladimir Putin, Russia has become a normal country. “They call Putin a dictator, but I personally would choose another word to describe a man under whom the economy grew tenfold. I arrived here in 1993 and I’ve experienced all the positive changes myself.” According to a study carried out by the brand agency Landor Associates and the publication Russia Beyond The Headlines, Russia’s president, if seen as a brand, is the second most popular in the country after Russia itself. That says a great deal.

The French economist Charles Gave dedicated his presentation to an analysis of bear markets. “We find ourselves in a bear market if the index falls by 20% compared to last year,” he explained. “Under this definition, since 1971 when I started out, the MSCI World Index has faced a bear market five times.” An interesting fact in relation to this, is that all bear markets occur during periods of recession, and the longer the recession lasts, the longer we won’t see any bull markets. Gave refrained from suggesting an exact date for the end of the present downturn, letting each person present come up with a solution for this problem on their own.