Russian capitalism turns off equity investors

Capital flight persists, reflecting low confidence among Russia-based investors and an aversion to the country risk among foreigners. Also hitting equities, those who do want exposure to Russia can find safer, stronger returns from government bonds.

From Russia without love

Many analysts had hoped that a restoration of calm after Russia's parliamentary and presidential elections - which sparked the largest opposition protests since Putin first became president in 2000 - would revive investor interest.

Reforms to Moscow's market infrastructure, including the commissioning of a new central securities depository to simplify trading and settlement, have meanwhile been touted as part of a drive to create an international financial hub.

But Peter Westin, chief equity strategist at Moscow brokerage Aton, is just back from three weeks of meetings with foreign investors and has concluded: Russia remains unloved.

People like Russia - potentially, he said. But it has been a momentum trade for the past three or four years and a total derivative of global events and the oil price.

The recent sale of a $5-billion stake in state-controlled Sberbank did draw buyers - thanks to the stock's liquidity, strong management and restructuring potential. But those are rare qualities in a listed Russian company.

Steven Dashevsky of Dashevsky and Partners, an investment boutique, is scathing about those making the rules: Trading has died down, he said, Because the Russian government has made considerable efforts to demonstrate

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