Equity strategists from a majority of leading Russian and international investment banks and brokerage houses have predicted that the flow of Russian equity fund raisings will not resume until H1 2010. A poll of leading analysts conducted by Merlin has established that 11 out of 15 interviewed analysts do not see international IPOs by Russian companies resuming before Q1 2010, while Q3 2010 was named by most analysts as the likely timeframe for Russian domestic IPOs to recommence.

In comparison, 2008 saw four international listings of Russian companies raising US$941 million. In 2007 and 2006 these figures were respectively 20 international listings raising US$20.2 billion and 22 international listings raising US$17 billion. There have been none so far this year.

The majority of participating analysts predicted growth in the Russian equity market in the second half of 2009, with a median forecast of 58% annual growth in the key Russian indices during the calendar year.

“I expect the equity market to remain low until the mid Q2, with a steady worsening of both corporate and economic news flow pushing prices to a low point around end March or early April”, said Christopher Weafer, Chief Strategist at URALSIB Investment Bank. “But we expect a strong market performance in the second half of the year based on a rally in commodities and a return of investor appetite for risk.”

Almost half of the analysts polled see the Russian market performing in the top quartile of the global equity markets in 2009. This would be a big change from last year when the headline MICEX index fell by 67.2 per cent and US Dollar denominated RTS index fell by 72.4 per cent after seven years of strong, uninterrupted growth.

“Russian equity has been most efficient in pricing in disaster. We expect it to be most leveraged in recovery”, said Roland Nash, Head of Research at Renaissance Capital.

Among the sectors of the Russian equity market, Oil and Gas is predicted to outperform the market in 2009, and is forecast to be the best performer by two-thirds of participating analysts. The sector has seen a substantial collapse in value during 2008 with the MICEX Oil & Gas index down 59 per cent on the back of the significant decline in the oil price. Other sectors named as likely outperformers include TMT, Utilities and Chemicals. Real Estate is expected by the majority to remain the worst performer in the Russian market, impacted by the dramatic slow-down in property sales and construction. Financial Services, Metals and Mining, and Consumer and Retail are also tipped as potential underperformers by some analysts.

Leonid Fink, Merlin’s Director for Russia and CIS said: “After the very difficult year in 2008, it is encouraging to see that analysts are predicting an upturn, albeit one that is still some way off. Analysts clearly see liquidity returning to the international markets before domestic ones, and this should drive a return to international secondary and primary offerings from Russian companies”.

The research was undertaken amongst 15 leading investment banks and brokerage houses during the course of January 2009. The following institutions participated in the survey: Alfa-Bank, Deutsche Bank, Goldman Sachs, HSBC, IFC Metropol, JPMorgan, Morgan Stanley, Prospect Investment, Renaissance Capital, Rye, Man & Gor Securities, Troika Dialog, UniCredit, URALSIB, Veles Capital, VTB Capital.