Table of Contents

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CHAPTER 01

THE RUSSIAN MACROECONOMIC SITUATION

  • Introduction
  • Economic indicators
  • Rates of growth
  • Economic drivers of growth
    • Oil
    • Consumer spending
    • Construction
    • Financial services
    • Investment

Russian oligarchs and the Kremlin’s nine commandments for big business

  • State involvement
  • The nine commandments
  • The BRIC prediction

Current financial situation

  • International reserves and debt
  • State funds
    • Stabilisation Fund
    • State Investment Fund
    • State Venture Capital Fund
    • State Future Generations Fund
  • Inflation
    • Interest rate control
  • Rouble appreciation, currency controls and de-dollarisation
    • Currency flows
  • Money supply and dollars
  • The federal budget
    • Oil and economic expansion
  • Trade and the balance of payments
  • Political events
  • Politics and fiscal loosening
  • Oil price scenarios

CHAPTER 02

THE BANKING SECTOR

  • Overview
  • Initiating sector reform
  • Russian bank sector fundamentals
  • Bank reform
  • 2004 mini-crisis
  • Deposit insurance
  • Sector consolidation
  • Foreign ownership of Russian banks
    • Subsidiaries rather than foreign branches
  • A new mega-regulator
  • Bank sector growth
  • Consumer credit
    • Car loans
    • Credit cards
    • Mortgages
  • The regions
  • The future role of banks
  • Sector challenges
  • Falling capital adequacy
  • Non-performing loans
    • CBR acts to curb NPLs
  • Home credit bites the bullet
  • Devaluation and currency risk
  • Exposure to equities
  • Investing in banks
  • Portfolio investments
  • Private equity investments

CHAPTER 03

EQUITIES - MARKET COMPOSITION & PERFORMANCE

  • Background
  • RTS development
    • Inception to October 1997
    • October 1997 to October 1999
    • October 1999 to today
    • Summary
  • RTS performance under Putin
  • RTS composition
  • Growing state share of the index
  • IPOs
  • Diluting the index
  • Opening up new sectors
  • Pricing challenges
  • Owners’ motivations
  • IPO pipeline congestion
    • Banks
    • Utilities
    • Small companies
  • Impact on liquidity
  • Stock exchange trading
  • The main exchanges
    • Trading volumes
  • The OTC market
  • Russia as an emerging market
  • International investment flows into Russian equity
  • Stock valuations and P/E ratios
  • Traditional market drivers
  • The seven year boom
  • Liquidity
  • Oil prices
  • The effect of oil on liquidity
  • Rouble appreciation
  • Bank sector liquidity
  • The tax schedule
  • Foreign investment in Russian funds
  • Foreign capital inflows
  • Domestic consumption
  • Domestic investment - the new market driver
  • Investment growth
  • Investment structure
  • Sources of investment capital
  • Investment pitfalls
  • State investment programmes
    • Power
    • Defence
    • Nuclear
  • Market volatility
  • The links between GEMs
    • Electricity
    • Banks
    • Fixed-line telcos
    • Consumer
  • Sell-off cycles
  • Seasonal factors

CHAPTER 04

BONDS

  • Background
  • Economic recovery
  • Bond market development
  • Bond market structure
  • Rising turnover in all sectors
  • Inflation and interest rate challenges
  • Lessons from Russia’s first ever corporate bond default
  • Sovereign bonds
  • Sovereign Eurobonds
  • Paris club redemptions
  • Aries bonds
  • Spread performance
    • Influences on spread compression
    • Russian debt becomes a defensive asset
  • Domestic sovereign bonds
  • Government debt strategy
  • The OFZ market
  • Domestic bond ownership
  • Corporate Rouble bonds
  • Market development
  • Secondary market trading
  • Currency liberalisation
  • Corporate Eurobonds
  • Bank borrowing of Eurobonds
  • The rise of bank Eurobonds
  • Municipal and other bonds
  • Broadening the borrowing base
  • Other debt instruments
  • Credit-linked notes
  • Veksels
  • Asset-backed securities and mortgages
    • Obstacles to expansion
  • Russia Railways’ Red Arrow SPV
  • Bonds and real estate
  • Rouble Eurobonds

CHAPTER 05

SECURITISATIONS

  • Background
  • Market beginnings
  • Growth prospects
  • Domestic securitisations

CHAPTER 06

SYNDICATED LOANS

  • Background
  • Leading borrowers
  • Leading lenders
    • The influence of state-owned enterprises

CHAPTER 07

MERGERS & ACQUISITIONS

  • Background
  • Sector changes in M&A
  • Steel
  • Aluminium
  • Telecoms
  • Banks
  • Utilities
  • Mobile phones
  • Supermarkets
  • Transaction structure
  • Lending constraints
  • LBOs and MBOs

CHAPTER 08

PRIVATE EQUITY FUNDS

  • Background
  • Market opportunities
  • New target areas
  • Oligarch funds and the rise of the minigarch
  • The new investment class
  • Sources of private equity capital
  • Future challenges
  • The main Russian private equity funds
  • Troika Capital Partners
  • Alfa Capital Partners
  • East Capital
  • Firebird management
  • Baring Vostok Capital Partners
  • Prosperity Capital Management
  • Mint Capital

CHAPTER 09

  • Venture capital
  • Background
  • Home-grown venture capital
  • Early successes
  • Early funds
  • Russian Venture Company
  • State telecoms venture fund
  • Regional venture capital funds

CHAPTER 10

PENSION FUNDS

  • Background
  • Pension reform
  • Pension reconstruction
  • Pension market structure

CHAPTER 11

MUTUAL FUNDS

  • Russian investment in mutual funds
  • Sector revival
  • Current investment preferences and future projections

CHAPTER 12

DERIVATIVES

  • Background
  • Legal developments
  • OTC trading
  • FORTS
  • MICEX Derivatives Market Section
  • Russian derivatives trading in London

TABLES & FIGURES

  • F: Russian consumer market dynamics, 1999-2006E (US$bn, %)
  • F: Average Russian monthly wage, 2000-08F (US$)
  • F: Russian population demographics and financial statistics
  • F: Individual Russian client wealth, 2006 (US$)
  • T: Russian GDP by production and use, 2005 to 2006 (RUBbn, %)
  • T: Russian GDP growth by sector, 2006 (% y-o-y)
  • F: World’s largest economies, 2006-07
  • F: Top holders of foreign exchange reserves (US$bn)
  • F: Russian Stabilisation Fund growth, Jan 2004-Oct 2006 (US$bn)
  • F: Russian inflation, 2003-09F (%)
  • T: Russian budget law and execution, 2003-07 (% GDP)
  • F: Russian Federal budget revenues and expenditures, 1998-2007E (% GDP)
  • F: Oil price - Brent quarterly average, 1Q2006-4Q2007F (US$/bbl)
  • T: Russian external trade, 2004-06 (US$bn)
  • F: Russian exports, by sector, 2006 (%)
  • T: Russian economic performance under President Putin, 2000-06
  • T: Public trust in Russian politicians, 2006 (%)
  • T: Duma election, Dec 2003 - Share of popular vote, number of seats
  • T: Brent oil prices - Forecasts and implications
  • T: Russia’s Top 30 Banks, September 2006 (US$)
  • F: Sberbank’s share of the Russian deposit market, 2003-06 (%)
  • T: Top Russian consumer loan providers, 2006 (%, US$m)
  • T: Top Russian car loan providers, 2005 to 2006 (US$m, %)
  • T: Top Russian credit card issuers, 1H2006 (US$m, %)
  • F: Russian loans market growth, July 2004-July 2006
  • F: National household loans markets, 2006 (% of GDP)
  • T: Russian deposits and loans, 2002-10E (US$bn, %)
  • T: Retail loans - bank share, 2005 to 2006 (RUBbn, %)
  • F: Banking liquidity indicators, Jan 2002-July 2006 (%)
  • F: Growth of non-performing consumer loans, July 2004-July 2006 (%)
  • T: Significant foreign M&A deals with Russian banks, 2004-06 (US$m)
  • T: Russian banks’ stock exchange performance, 2006 (US$m,%)
  • F: RTS index, Sept 1995-Oct 1997
  • F: RTS index, Oct 1997-Oct 1998
  • F: RTS index Oct 1998-July 2004
  • T: Market breakdown, by sector, Nov 2006 (%)
  • T: Top Russian stocks, Jan 2007 (US$bn)
  • T: Ownership of Russian equities, 2003 to 2006 (%)
  • F: State voting stock in top 20 RTS companies, 2000-06 (%)
  • T: Russian IPOs, 1996-2006 (US$, %)
  • T: Annual value of Russian IPOs, 1996-2007E (US$m)
  • T: Forecast IPO issuance, 2007 (US$m)
  • T: IPO share performance, 1996-Sept 2006 (US$, %)
  • T: Performance of IPOs issued in 2006-Jan 2007 (US$, %)
  • T: Top IPO performers, 2004-Sept 2006 (US$, %)
  • T: Worst IPO performers, 2004-Sept 2006 (US$, %)
  • T: IPOs trading below initial price, Sept 2006 (US$, %)
  • T: RAO UES - Projected IPOs, 2007
  • T: Proposed IPOs, 2007 (US$m)
  • T: Growth in trading of the individual segments on MICEX, 2006 (%)
  • T: Equity trading - average daily volumes, Mar 2006 to Mar 2007 (US$, %)
  • T: Emerging markets funds - Russia weightings, 2006 (%)
  • F: Global emerging markets - country weightings, Sept 2006 (%)
  • T: Russian indices, by sector, Mar 2007 (%)
  • T: RTS, GEM and oil price performance, 2000-06 (%)
  • T: Weekly inflows to Russia, GEM and BRIC funds, 2006-Feb 2007 (US$m)
  • F: P/E ratios, by sector, 2007E
  • T: Russian share price performance and P/E ratio, Jan 2007 (US$, %)
  • F: Russian company P/E ratios, Jan 2007
  • F: Money supply vs equities, 2000-06
  • F: Equities vs oil prices, 2005-06
  • T: Oil export revenue, 2000-06F (US$)
  • T: Oil exports, 2000-06F (m bbl/d)
  • F: Russian exports, imports and oil price, 2000-09F (US$)
  • F: Breakdown of worldwide oil and gas reserves, 2006 (%)
  • T: Energy stocks related to oil price scenarios
  • F: Russian banks - excess reserves, 2003-07 (RUBbn)
  • T: Tax payment calendar, 2007
  • T: Inflows to Russia, GEM and BRIC funds, 2006-Feb 2007 (US$m)
  • F: Russian net private capital inflows, 1998-3Q2006 (US$bn)
  • F: Russian stock movements, Jan-Feb 2007 (%)
  • F: Fixed investment and stock exchange sector movements, 2004-06 (%)
  • T: Investment breakdown and growth, by sector, 1Q2006-3Q2006 (%)
  • T: Sources of investment financing, 2005 to 2006 (%)
  • F: RTS index, Jan 2005-Mar 2007
  • T: RTS cycles, 2003-06 (%)
  • T: RTS rallies, year-end and new year, 2000-05 (%)
  • T: RTS returns, 1997-2007 (%)
  • F: Russian bonds - sector breakdown, Dec 2006 (%)
  • F: Russian bond growth, by sector, 2003-06 (% CAGR)
  • F: Bond holder distribution, 1999-1H2005 (%)
  • F: Bond maturities, 2002-1H2005 (%)
  • F: Bond distribution, by sector, 1999-2005 (%)
  • F: Primary market bond issues and redemptions, 2002-1H2005 (RUBbn)
  • F: Bond trading on secondary market, 2002-1H2005 (RUBbn)
  • F: Distribution of state debt, 2004-08E (%)
  • F: Outstanding federal bonds (OFZ vs GSB, traded vs non-traded), 2006-08F (US$bn)
  • T: Russian external debt, 2006-08E (US$bn)
  • F: Russian Paris Club debt - breakdown by country, Jan 2006 (%)
  • F: EMBI+ spread, 2006 (bp)
  • F: Correlation between sovereign bonds and oil prices, 2000-06 (%)
  • F: Russia’s beta, 1Q2004-3Q2006 (bp)
  • F: Russian domestic bond ownership, 2006 (%)
  • F: Bank shares of bond issuance, by segment, 2006 (%)
  • F: Bond deals, 2001-Nov 2006
  • F: Top corporate borrowers, 2006 (US$bn)
  • F: Bond market breakdown, by sector, 2006 (%)
  • F: Russian Eurobond market 2001-07E (US$bn)
  • T: Emerging markets international bond issuance, 2001-2Q2006 (US$bn)
  • F: Russian corporate bond issuers, Nov 2006 (%)
  • F: Eurobond and CLN distribution, by type, Nov 2006 (%)
  • T: State-owned banks - lending capacity, 1H2006 (US$m)
  • T: Current Russian ABS issues (US$m)
  • T: Russian retail banking structure, 2004-1H2006 (US$bn)
  • T: Mortgage loan market, 2005-06 (US$m, %)
  • T: Mortgage market leaders, 1H 2006 (US$m, %)
  • F: Bonds connected to real estate borrowing (RUBm, US$m, %)
  • T: Rouble Eurobond issues, 2005-06 (RUBbn)
  • T: Russian ABS ratings
  • F: Russian securitisation, by asset class, 2006 (%)
  • F: Securitisation in Russia and Kazakhstan, 2003-06 (US$m)
  • F: Russian syndicated loans market, 2001-06 (US$bn)
  • F: Russian syndicated loans market, by sector, 2005 to 2006 (%)
  • F: Russian syndicated loans, by sector, 2002-06 (%)
  • T: Russian acquisitions of foreign steel assets, 2003-06 (US$)
  • F: Russian M&A transactions, 2005 to 2006 (US$m)
  • F: Russian M&A transactions, by sector, 2005 to 2006 (US$m)
  • T: Top 10 Russian M&A transactions, 2005-06 (US$m)
  • F: Russian private equity investment, by sector, 2005 (%)
  • F: Private equity investment, by stage, 2005 (%)194
  • F: Private equity investment, by Federal District, 2005 (US$m, %)
  • F: Sources of private equity capital, Russia vs India, 2006 (US$bn)
  • F: Russian IPOs, 2000-06, rebalanced (US$bn)
  • F: Growth of Russian domestic mutual funds, 2000-06 (RUBbn)
  • T: FORTS trading volumes, Sept 2001-Sept 2006 (RUBbn)
  • T: FORTS trading volumes, 2005 to 2006 (RUBbn)
  • T: RTS trading volumes, by instrument, 3Q2006 (RUBbn)