Summary:
- Foreign debt is increasing, partially due to gaining access to foreign investment.
- Trade balance is positive; lack of import growth suggests room for an import substitution effect
- Reliance on oil is becoming an evident problem for economic recovery
- Economically, with residential summit, Russia hopes to attract more capital from the US
From... United Bank of Switzerland Daily News Report 7/6/09:
Headline: Economics -- Rollover ratios for Russian Debt Rising
- External debt rose $24.3B USD from 1Q09 - to 2Q09
- Banks reduced foreign debt by $4B
- Gov't debt steady @ $27.7B
- CBR recorded $8B (up from $0 in 1Q09)
- Commentary: Select Russian companies have access to foreign loans. Good sign - it means that interest rates have fallen to levels that are attractive for borrowers, rather than dependence on public sector structures for refinancing.
Headline: Banking -- State Duma Approves the Law on Recapitalization of Banks via Federal Bonds
- The law states that a bank's capital will be increased by state OFZ bonds (Облигации Федерального Займа, federal coupon bearing bonds), in exchange for preferred shares to the state.
- Bonds set to mature 2019 @ w/ dividends at a margin of 3% of the coupon
- Bank shareholders can repurchase the bonds until 2014, after 2014, the state can sell it stake to other investors
- If bonds not redeemed by 2019, preferred shares will be converted into common stock
From... Alpha Bank Morning Brief 7/6/09:
Headline: Equity Market -- What Goes Up...
- Market performance was poor late last week; erased all gains from earlier in the week -- based on falling oil prices
Headline: Russia's Foreign Debt Increased by $24.3B USD in 2Q09
- Large portion due to oil companies borrowing from China
From... Deutsch Bank Morning Comment 7/6/09:
Headline: CBR - Russia's External Debt at $475.1B USD end June 2009
- Corporate rebounded by end of 2Q09 after a decline due to improvement in attitude towards global capital markets, ruble appreciation, higher oil prices
- The slowdown in the decline in corporate external debt suggests that with new borrowings and significant rollovers, the high-debt stock in corporate sector is still a problem
Headline: Russia's trade balance expands in 2Q09
- Russia's trade surplus expanded by $24.1B USD in 2Q09 due to the rise in fuel exports
- Growth of imports partly due to ruble appreciation
- Growth in fuel exports reflects the effects of the resumption of oil price growth
From... Troika Dialogue
Headline: Balance of Payments Remains Stable in 1H09
- Debt increased mostly due to borrowing by non-financial sector; banks kept paying foreign liabilities
- Illustrate that financial situation eased in 2Q09
- Balance of Payments indicates that there was no acceleration of imports growth May-June
- Lack of growth in imports left some room for important substitution
From... Business New Europe
Headline: Russia-US Summit – Investment Angles
- Russia needs access to US investment capital because oil revenues can not continue to pay for investment
- Investment in Russia have been either negative or insignificant due compared to other developing economies
- Factors include: high oil vulnerability, declining economy, bigger bank debt problem, and poor perception of Russia amongst international investors
- US would like Russia to back off its efforts to undermine the role of the dollar as the global reserve currency
Headline: Kudrin says 2010 Budget Could Assume Oil at $55 per Barrel
- FinMin forecasts crude oil averaging $55/barrel in 2010 and $54 in 2009
Headline: Russia's Foreign Debt Grows by 5.4% in 2Q09
- Two main factors leading to increase in debt: weakening of the dollar (which increased the value of non-dollar part of debt) and repatriation of capital to Russia by direct investors
Headline: 3Q Outlook – Russian Finance: Signs of Life
- Demand for Ruble debt is based on the appreciating Ruble, rising reserves, and falling interest rates
- The government is encouraging and demanding banks to start lending
- Interest rates will likely be cut by the CBR
- Fiscal stimulus planned in response to the crisis should start having an impact in 2H09
Headline: Inflation .6 % Inflation in June, 7.4% Jan-Jun
- Russia had .6% Inflation in 6/09 compared with .6% in 5/09 and 1.0% in 6/08
- Jan-Jun inflation was at 7.4%, 1.3 points lower than 8.7% the same period last year
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