MOSCOW. (Financial analyst Anatoly Gorev for RIA Novosti)
The future is bright for the Russian economy and stock market, according to Alfa Bank analysts. "Investors who bring their money to the Russian market, even without choosing specific shares, will profit by about 30%," they say in their forecast.
Alfa-Banking Group is one of Russia's largest privately owned banking groups in terms of equity, assets, branches, retail deposits and funds under management.
This is a good but not extraordinary profitability, especially compared with the past three years, when the Russian Trading System (RTS) stock exchange grew by 70% annually. But the promised growth of 30% may nevertheless make Russia a safe haven for foreign investors.
"Safe haven" is one of the terms that have been especially widely used in the past decade. It is increasingly interpreted as "a financially secure offshore bank or country during times of extreme uncertainty, or when domestic banks are suspected of becoming insolvent."
It should be not only safe, but also sufficiently large to offer a high level of liquidity. Investors search for such havens during global financial crises, such as the 1997-1998 Asian crisis, which began in Southeast Asia and later spread to Russia and Latin America, where it provoked defaults and created precedents for the devaluation of national currencies.
Another relevant example is the dotcom crisis in the United States in late 2000, which pushed the American economy into recession and slowed down the economic growth of its main trading partners in the European Union.
The latest shock to the global financial system came from the mortgage crisis in the United States, which froze stock markets and put into question the efficiency of bank refinancing mechanisms.
The difference between the above three crises is that in the latter case Russia was seriously considered as a safe haven. This is logical, as the 1997 Asian crisis provoked a default on domestic, and partially foreign, state debts in Russia, and an unprecedented plunge on the stock market and a subsequent economic depression.
At that time, Russia was viewed as a troublemaker rather than a safe haven. Although investors' attitude to Russia improved slightly in the early 2000s, none viewed the country as a suitable refuge during the dotcom crisis. Russia was unanimously considered unpredictable and vulnerable. However, the 57% average growth of the Russian stock market in 2001-2006 forced investors to revise their attitude, both to the market and the Russian economy as a whole.
Analysts say that Russia is now in a unique position to benefit from the current economic climate. It is safely insulated from the subprime mortgage crisis in the United States, and continues to benefit from high - and growing - oil prices, which will definitely exceed the ceilings stipulated in the Russian budget.
Forecasts promise continued economic growth in Russia, of 6.5% annually, and a 15% increase in its gold and foreign currency reserves, to a total of $535 billion.
The consumer boom is also expected to push the Russian economy to new highs, while international investors will seek to insure their risks by moving funds from American and European assets to highly profitable and safe instruments. The latter include Russian shares, especially the stock of mining companies, bank securities, and the like.
Alfa Bank's analysts say political stability in Russia is one of the positive strategic factors. Along with the majority of experts, they do not believe that the upcoming presidential elections will produce major quakes in Russia's political life. A radical change in its economic policy also seems unlikely after the elections.
"The election of [First Deputy Prime Minister] Dmitry Medvedev as president of Russia appears to be the most probable scenario, in which case [President] Vladimir Putin will agree to become prime minister. This promises four more years of political stability in Russia," the bank's forecast says. "If this scenario is followed, we expect accelerated implementation of priority national projects in infrastructure development, housing construction, healthcare and agriculture, as well as redoubled efforts to encourage growth in manufacturing."
However, even a country that claims the role of a "safe haven" cannot be absolutely free from economic trouble. Alfa Bank's analysts single out inflation as Russia's biggest worry. It exceeded planned levels in 2007, and with neither the prices of commodities nor the influx of petro dollars likely to subside, the government may also fail to restrain the growth of prices in 2008.
But this does not scare potential investors.
The only thing that can seriously darken Russia's prospects is that it is not the only country vying for the role. Competition comes from the rapidly growing economies of China and India, and possibly some Arab countries, which, like Russia, are prospering from record-high oil prices.
International investors' interest in them is growing, yet, say the analysts, Russia looks attractive even against this background, because its economy is more diversified and banking system better developed.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
