The first substantial initial public offering to take place exclusively on the Moscow stock exchange was always going to be a challenge. Even more so for the Exchange itself, which floated around 30 per cent of its shares on its own trading platform on Friday. The $500 million offering was more than twice-subscribed, attracting among others China’s sovereign wealth fund CIC, which had originally sought 20 per cent of the new shares. But it priced at the bottom of the indicative range. It will be a while before Moscow can celebrate the opening of a global financial centre.
The Moscow Exchange originally envisioned a parallel listing in London. It decided on an all-Russian IPO just as Vladimir Putin publicly said that Russian companies included in the government’s privatisation plans should list locally. The necessary “infrastructure”, said the country’s president, should be readied before the programme begins.
In that context it would have looked bad for the Moscow Exchange to seek investors on other bourses. But Moscow will need more than this all-Russian and half-successful IPO to become a true financial centre.
First, Russia suffers from the lack of a domestic investor base. Even the country’s two quasi-sovereign funds - the $60 billion state pension funds and the $80 billion, rainy-day fund built up with oil money - don’t invest in equities. As for retail investors, most keep their savings in real estate and deposits while the richest of them send money abroad. As long as Russia’s largest investors vote with their feet, dreams that Moscow will become a global financial centre will remain just that - dreams.
Rampant corruption, and the absence of a rule of law, also play against the country’s grandiose plans. They are a drag on the economy, and put Russian markets under a cloud of suspicion. This is due less to the way the Exchange operates than to the relatively lax regulation governing listed companies and the lack of interest for protecting minorities’ interests.
The much-needed “infrastructure” Putin is calling for is not just financial. It cannot be built without the reforms — political, legal and otherwise — that his regime has steadfastly refused to consider.
The Moscow Exchange originally envisioned a parallel listing in London. It decided on an all-Russian IPO just as Vladimir Putin publicly said that Russian companies included in the government’s privatisation plans should list locally. The necessary “infrastructure”, said the country’s president, should be readied before the programme begins.
In that context it would have looked bad for the Moscow Exchange to seek investors on other bourses. But Moscow will need more than this all-Russian and half-successful IPO to become a true financial centre.
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Rampant corruption, and the absence of a rule of law, also play against the country’s grandiose plans. They are a drag on the economy, and put Russian markets under a cloud of suspicion. This is due less to the way the Exchange operates than to the relatively lax regulation governing listed companies and the lack of interest for protecting minorities’ interests.
The much-needed “infrastructure” Putin is calling for is not just financial. It cannot be built without the reforms — political, legal and otherwise — that his regime has steadfastly refused to consider.