Page 67 - bne_Magazine_February_2019

bne February 2019 Eastern Europe I 67
Smaller Russian equity market pie, but bigger pieces
Kirill Chuyko: We have built a very strong team in the last several years and especially in the last half a year when we hired five talented new analysts, which will help us to get into a leading position for analysis.
We have a very strong product in metals and mining, which is one of the best sectors in the EEMEA [Eastern Europe, Middle East and Africa] space. Last
year our research was number one and this year we got a number two ranking on the individual basis. The new hires will help us build a new franchise in all sectors.
Following the tie up with our partners, [the US based fund manager] Tigress Financial Partners, we plan to diver- sify our product into the US and other markets. And we started covering the CIS last year.
BA: BCS is covering all the leading compa- nies in the CIS, but most of the biggest are still in Russia.
KC: You can look at these CIS companies and they have very solid liquidity and fundamentals, like Ukraine’s Ferrexpo or Kazakhstan’s KAZ Minerals. They enjoy healthy margins comparable to those in Russia. They have healthy liquidity so there are no problems with investors buying or selling a big stake. If you look at banks or other production assets like
VOX:
Ben Aris in Moscow
Interest in Russian equities is picking up again as the economy recovers and earnings rise again. Russian companies had their most profitable September in three years, earning a collective RUB1,580bn ($23.7bn) in the month and cumulative profits for the year to date of RUB$154bn – about a third more than they earned over the same period a year earlier.
The growth in earnings is not reflect-
ed in the RTS index, which has been range bound at around 1000 points for the last four years, but it is reflected in the individual names, some of which have doubled in value in the last year. Moreover, the irony of the sanctions and instability is that Russia is paying the highest dividend yields in the emerg- ing markets (EM) world; current yields are circa 7%, which about twice the benchmark MSCI EM average. The pie has become smaller, but the slices are bigger, argues Kirill Chuyko, the head of
research at BCS Global Markets. BCS is attempting to step into these gaps left in the market. It has opened offices in Lon- don and New York and at the same time
“Russia is paying the highest dividend yields in the emerging markets (EM) world; current yields are circa 7%, which about twice the benchmark MSCI EM average.”
expanded its Moscow research depart- ment, which now also covers the biggest and best names in neighbouring markets like Kazakhstan and Ukraine.
Ben Aris: Please give me some back- ground of the key developments in your department and products.
[Ukraine’s leading sunflower producer] MHP then investments will depend in some part on the story of the country in general. But in general they are good com- panies. The risk to return is not far from that in the Russian market. Our plan is expand into Georgian banks and [Kazakh- stan’s leading bank] Halyk as well.
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