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April 13, 2018 www.intellinews.com I Page 6
head of the state-owned financial arm of Gazprom he is a natural candidate for inclusion in the list. As is the reclusive owner of privately owned oil company Surgutneftegas Vladimir Bogdanov.
While not a stoligarch, Bogdanov is supposed
to be very close to Putin and it is alleged that Putin secretly owns a significant part of the oil company worth billions of dollars. Activist fund manager turned Kremlin foe Bill Browder told bne IntelliNews that his Russian visa was revoked at the behest of Surgut after he carried out an investigation into the oil company’s Byzantine shareholder structure.
Collateral damage
Market boards were splashed with red as innocent bystanders got caught up in the panic selling,
not just the companies belonging to the listed businessmen.
The second worst performer after Rusal was Kerimov’s Polyus Gold, which lost 18.31% in the day’s trading.
VTB shares took a 9.03% hit, which was relatively mild, as the state-owned bank’s chairman Kostin was also named on the SDN list.
Steel plant Mechel was the worst performing from the stocks that were not linked to the SDN list. However, the troubled company announced on April 9 that its creditors had tightened credit terms after it broke conditions in its debt covenants in 2016 and 2017. Despite making a remarkable recovery in the last two years and announcing its first profit in five years in 2017 Mechel remains heavily indebted and is struggling to recover.
State-owned retail banking giant Sberbank was not named, nor was its chairman German Gref, but Sberbank ordinary and preferred stock fell 17.04% and 13.44% respectively even after the bank tried to play down the impact of sanctions on Russian business.
Sberbank’s fall will hurt international investors as much or even more than the Kremlin as Sber- bank has become a “tourist” stock in the last few years: every investor that wants any exposure to the Russian market buys Sberbank shares first. Before the shock of the April 9 selloff Sberbank was the second most overweight stock in the emerging market universe and Russia the second most overweight market amongst the benchmark MSCI EM index. Despite the fraught political rela- tions with the West, the average global emerging market fund's overweight in Russia has doubled in the past two years, as holdings have grown
to 5.4% versus an MSCI EM weight for Russia
of circa 3.5%.
Other stocks that took a beating include the ordinary shares of gold miner Polymetal (-12.66%), big three mobile phone company Megafon (-9.77%), pipemaker TMK (-9.15%) and Russia’s national airline Aeroflot (-8.46%).
Stocks are expected to bounce back as they did following the annexation of the Crimea and a very short list of companies will be directly affected by the prohibition on contact with US investors. However, the wider implications of the sanctions are not yet clear.
For example, Sberbank is not listed but it has an estimated $10bn exposure to the companies that are, and as a state-owned bank it is unlikely to unwind those positions, creating a new risk for US investors into its stock and bonds.
Removing Rusal from the international aluminium trade could also have a significant affect on the international trade. The company earns 79% of
its revenue from exports and the US accounts for 14% of its business. Removing Rusal’s input from the international aluminium trade could change the nature of the market and send prices up as
a result, say analysts. The price of aluminium surged the most in more than two years on the London Metal Exchange on Monday.