Looking Back on 2012: for Russia, More Good than Bad

By Chris Weafer, April 1, 2013

1,2%

5,9%

3,8%

2,9%

1,8%

 Geopolitics – Positives

Relations with Georgia have improved and a dialogue has been opened with the country’s new prime minister. Indications are that the new Japanese government will agree to finally negotiate a peace deal (WWII legacy) with Russia. This is no doubt prompted by Tokyo’s desire to expand its allies as relations with China deteriorate, but it could also bring in more money to Russia’s Far East.
The APEC summit was deemed a modest success. Relations with Germany are solid and improved with the opening of Phase 2 of the Nord Steam gas pipeline. Mitt Romney was not elected U.S. President.

Geopolitics – Negatives
Russia’s position on Syria has put it at odds with most Western governments. The Magnitsky case and Moscow’s (still unclear as of this writing) response to the bill. Russia’s management of its image abroad and international perception of that image show no sign of improving. Russia has banned foreign-funded NGOs, unless they register as foreign agents.

 

ADR/GDR leaders and laggards YTD

 

 

Price*, $

YTD*

Trans Container

14.25

82.7%

Severstal

12.50

9.7%

Magnit

38.16

80.3%

Cherkizovo Group

11.98

8.9%

TMK

15.18

68.7%

Polyus Gold (GBP)

208

8.0%

O’Key

11.35

65.7%

Polymetal (GBP)

1,176

7.5%

PhosAgro

13.25

57.0%

Uralkali

38.32

6.4%

Eurasia Drilling Company

36.45

55.1%

IRC (HKD)

1.09

2.8%

Tatneft

42.51

43.6%

NLMK

20.19

2.8%

NOMOS Bank

13.54

42.5%

MD Medical**

12.00

0.0%

Mail.ru Group

34.17

31.4%

Global Ports

13.99

0.1%

AFI Development

0.55

31.0%

Gazprom Neft

23.37

0.6%

Rosneft

8.52

29.0%

UC RUSAL (HKD)

4.89

0.6%

MTS

18.47

25.8%

Ros Agro

6.50

1.5%

LUKoil

65.25

23.2%

VTB

3.46

4.2%

LSR Group

4.12

22.0%

NOVATEK

119

4.6%

Raven Russia (GBP)

0.63

21.6%

CTC Media

8.09

7.8%

Norilsk Nickel

18.61

21.6%

NCSP Group

6.90

7.9%

MegaFon**

23.88

19.4%

HMS Group

4.03

8.7%

Globaltrans

16.40

19.3%

MMK

4.36

10.4%

Sberbank (RUB)***

93.47

17.8%

Gazprom

9.46

11.3%

Sistema

19.57

16.4%

Mechel

6.62

22.1%

Pharmstandard

16.38

16.2%

X5 Retail Group

17.60

22.9%

VimpelCom

10.85

14.6%

RusHydro

2.35

23.1%

Chelyabinsk Zinc

2.45

14.0%

PIK Group

1.89

23.5%

Etalon Group

5.30

12.8%

Evraz (GBP)

258

31.2%

Yandex

22.15

12.4%

Petropavlovsk (GBP)

351

42.9%

Surgutneftegaz

8.77

12.0%

RusPetro (GBP)**

72.25

46.1%

Highland Gold Mining (GBP)

99.75

46.9%

 

Reforms – Positives

WTO entry from August after nearly 19 years of negotiations – a positive reflection of the fact that the government understands it needs to bring in more foreign investment and active investors.
The campaign against corruption – the jury is still very split on this, as are the people. The campaign is almost equally split between the view that this is a real response to people’s frustration expressed in the protests and the view that it is only a temporary action aimed at internal political score-settling. We will only start to understand which view is right when, and if, we see further actions in 2013.
Financial sector reforms continue to roll ahead steadily – the Central Depositary is now in place, and Euroclear and Clearstream will gain access to the local debt market early in