- Government assets for sale — "The Russian government has announced its intention to sell government stakes in a number of Russian companies for around $30bn. The list of companies for sale is likely to include stakes in oil giant Rosneft, banks Sberbank and VTB, and other state-controlled companies, including Transneft and RusHydro. In addition, several fully state-owned companies may be partially privatized."
- More supply should bring benefits… eventually — "Although the Russian equity market is relatively liquid, trading is concentrated in a handful of shares, primarily commodity stocks and banks. Any action to increase the supply of companies outside the extractive industries is likely to be taken well by the market."
- Could also encourage “best behavior” from government — "Another prospective benefit of privatization would be to encourage greater disclosure by the government and a more investor-friendly approach in the run-up to major asset sales. Hopefully this would result in greater clarity on issues such as tax policy."
- However the sales, if they happen, will take time — "Recent comments from the
Finance Ministry and other government agencies indicate that the plans are still evolving, and that in any case completing the proposed sales could take years. This is likely to be particularly true for the fully government-owned companies being brought to market for the first time."
- Market likely to absorb new supply — "$30bn would represent about 15% of Russian equity free float. While not an insignificant amount, this is likely to be absorbed by the market over time. The pipeline of other planned IPOs over the next two years is around $8bn."
- More interesting government sales: less liquid stocks, consumer, infrastructure — "Less liquid stocks such as Transneft are likely to benefit from privatization sales, as should consumer and infrastructure-related stocks."
- More supply should bring benefits… eventually — "Although the Russian equity market is relatively liquid, trading is concentrated in a handful of shares, primarily commodity stocks and banks. Any action to increase the supply of companies outside the extractive industries is likely to be taken well by the market."
- Could also encourage “best behavior” from government — "Another prospective benefit of privatization would be to encourage greater disclosure by the government and a more investor-friendly approach in the run-up to major asset sales. Hopefully this would result in greater clarity on issues such as tax policy."
- However the sales, if they happen, will take time — "Recent comments from the
Finance Ministry and other government agencies indicate that the plans are still evolving, and that in any case completing the proposed sales could take years. This is likely to be particularly true for the fully government-owned companies being brought to market for the first time."
- Market likely to absorb new supply — "$30bn would represent about 15% of Russian equity free float. While not an insignificant amount, this is likely to be absorbed by the market over time. The pipeline of other planned IPOs over the next two years is around $8bn."
- More interesting government sales: less liquid stocks, consumer, infrastructure — "Less liquid stocks such as Transneft are likely to benefit from privatization sales, as should consumer and infrastructure-related stocks."
Citigroup Russia Strategy 20100730
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