Financial News
Jason Corcoran in Moscow
27 March 2007
One of the most highly-rated analysts and strategists in Russia has quit UBS less than four weeks after Ed Kaufman, formerly the Swiss bank's head for the country, left to join a domestic rival.
Al Breach, a managing director in UBS' equity research division in Russia, is taking time out before deciding what to do next. He is rumoured to be considering a number of offers, including working for a hedge fund and a bank in Asia.
His departure comes a month after Kaufman, head of UBS Russia, left to join Alfa Bank as chief executive of its investment banking business.
Breach will remain at UBS until a replacement can be found and trained, possibly until the end of the year to help with the transition.
London-based Vladimir Postolovosky serves as co-head of research for Russia.
Apart from an eight month stint in Japan, Breach has been in Moscow since 1996. He was previously Goldman Sachs' economist for Russia and the former Soviet Union. A Briton, he has also lived in China and worked as fund manager at Rothschild Asset Management in London.
He was this month nominated to the board of directors at Vostok Nafta Investment, a Swedish investor in Russia's oil and gas industry.
One of the leading Western investors in Russian stocks said: "Al knows the Russian economy very well and makes the right calls most of the times. He is going to be hard to replace."
Breach predicted that the market would bounce back strongly from its reversal in late 2004 following the jailing of Yukos chief executive Mikhail Khodorkosky. It did with Russian stocks up 70% in 2005.
The demand for analysts in Moscow has never been higher with many Western top-tier banks expanding and looking to build up their Russian coverage.
Two highly rated analysts at Deutsche UFG, the German bank's Russian investment banking business, quit earlier this month. Stephen O'Sullivan left to head Macquarie Bank's Asian and Japanese research operation, while Gary Jenkins, head of European fundamental credit strategy and one of the most high-profile credit analysts in London, departed for a role at a buyside company.
Independent Russian banks Renaissance Capital and Troika have in recent years overtaken Deutsche UFG and UBS in the analyst league tables.
UBS bought out Brunswick's 50% stake in its Russian joint venture UBS Brunswick in 2004.
Al Breach and UBS declined to comment.
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1 comment:
Good morning Jason,
Investment bankers, asset and fund managers and western exchanges are coming in droves to Moscow to grab as big a share as possible of what may well turn out to be a massively overblown baloon.
Between march 22nd and May 30th I have counted no less than three major IPO conferences in Moscow each bringin together 300+ participants with top notch speakers from Euronext, Deutsche Borse and LSE/AIM markets. No doubt I have missed many more.
So I think my investor alerts, if unpopular, may prove timely. I have two: the first for potential investors and the second for Russian issuers.
Nearly one hundred years ago we French investors paid dearly to learn that Russia does not fulfil her contractual obligations even when she has the means to do so.
Sincerely,
Karolus.
+++++++++++++++++++++++++++++++++
April 2007.
RUSSIAN INVESTMENTS:
RUSSIAN IPO INVESTOR ALERT
French holders of Russian government bonds remind all investors that the Russian Federation is still in default today (April 2007) on their estimate of some US$ 80 billion owed to them since the Bolshevik, then the Soviet, and now the Russian Federation governments have all unilaterally repudiated Tsarist debt and refused any form of contact or dialogue with their creditors.
They also remind investors that in its Sep. 15th 2006 report entitled "Governance matters: a decade of measuring the quality of governance", the WORLD BANK rated Russia's governance comparable to that of Swaziland, Zambia and Kazakhstan. Russia came 151st out of 208 countries in terms of (...) accountability, quality of regulatory bodies, rule of law, (...). In particular, rule of law (i.e. the courts and the quality of contract enforcement) was judged as effective in Russia as it is in Ecuador, Indonesia, and Bangladesh. Nicaragua, East Timor, and China's ability to control corruption was judged similar to Russia's.
On April 3rd 2007 Mr. John Thain, the New York Stock Exchange CEO, warned that he was "very concerned about the quality of corporate governance, the transparency of company financials and the protection of minority shareholders. A number of Russian companies raise serious questions around these issues."
Despite these findings, and despite the main rating agencies' knowledge that Russia is in default on US$ 80 billion of Tsarist debt, Russia is rated "INVESTMENT GRADE".
French bondholders intend to pursue their claim until full settlement at present value, by any legal means and in any jurisdiction they deem appropriate.
EVERY POTENTIAL INVESTOR IN RUSSIA MUST BE MADE AWARE OF THESE FACTS.
FRENCH CREDITORS OF THE RUSSIAN FEDERATION STRONGLY ADVISE AGAINST ANY FORM OF INVESTMENT IN A COUNTRY WHOSE SOLVENT GOVERNMENT HAS SYTEMATICALLY REFUSED TO FULFIL ITS NATIONAL AND INTERNATIONAL OBLIGATIONS, REFUSES ALL CONTACT AND DIALOGUE WITH ITS BONA FIDE CREDITORS, AND REFUSES TO DISCLOSE LIABILITIES WORTH US$ 80 BILLION.
+++++++++++++++++++++++++++++++++
APRIL 2007.
RUSSIAN ISSUER ALERT:
STAY AWAY FROM EURONEXT
Did you know that Russian government bonds have actually been listed on EURONEXT's Paris exchange for many years? And did you know that EURONEXT has been refusing to let these bonds be quoted for the last ten years, without any serious justification, despite constant demand from all bondholders?
This unjustified suspension has now become the longest in the Paris exchange's history.
ANY POTENTIAL RUSSIAN ISSUER CONSIDERING AN IPO MUST BE MADE AWARE OF THE VERY REAL RISK INVOLVED IN CHOOSING EURONEXT AS A LISTING OPTION, AND REALISE THAT EURONEXT MAY WELL DECIDE TO STOP QUOTING THEIR SHARES OR BONDS WITHOUT WARNING, FOR AN UNDETERMINED PERIOD OF TIME, AND FOR NO VALID REASON.
There is also another good reason for avoiding EURONEXT as a listing venue, as has been pointed out by Mr. Vladimir KUZNETSOV, the Director-Equity Financing for FINAM; in an article entitled "European seismic shift - goodbye EURONEXT" he writes that while in Paris on April 3rd 2007 for the official launch of the NYSE-EURONEXT merger, Mr. John THAIN, head of NYSE (the New York Stock Exchange), "had warned peer exchanges against accepting listings from Russia..." and had "outlined an international strategy for the merged NYSE-EURONEXT group as focusing on Asia", describing it as "the next logical step".
Until now EURONEXT had been aggressively marketing its services to Russian IPO candidates.
What do Mr. THEODORE, EURONEXT's President, and EURONEXT's Moscow representative, think of Mr. THAIN's views?
Mr. THAIN said other interesting things in Paris, although Mr. KUZNETSOV did not quote them.
Mr. THAIN said:
"I am very concerned about the quality of corporate governance, the transparency of company financials and the protection of minority shareholders. A number of Russian companies raise serious questions around these issues."
So, Mr. KUZNETSOV is right: the merged NYSE-EURONEXT exchange is no longer the welcoming exchange for Russian IPOs it was thought to be. They no longer want Russian IPOs, and Russian IPOs should not want them, if they are to be sure of being reliably quoted over the long term.
But if you are thinking of getting listed on another exchange you had better act quickly: London is very soon going to toughen up its own rules for IPO candidates. According to Mr. Oleg VYUGIN, head of the Federal Financial Markets Service (FFMS), "perhaps this is an echo of the PriceWaterhouseCoopers case"; PwC audits several dozen Russian companies, and has been accused of providing false reports on Yukos which was declared bankrupt last year, before its main assets were passed on to Rosneft which was then floated on the London market.
Anyway, the long and the short of it is: Western markets do not trust the Russians.
A SOLVENT GOVERNMENT WHICH IS IN DEFAULT ON AN ESTIMATED US$ 80 BILLION, AND WHICH HAS SYSTEMATICALY REFUSED ANY CONTACT WITH ITS CREDITORS, CANNOT BE TRUSTED.
HOLDERS OF PARIS-LISTED RUSSIAN GOVERNEMENT BONDS STRONGLY ADVISE AGAINST ANY FORM OF INVESTMENT IN RUSSIA UNTIL ITS GOVERNMENT HAS SHOWN ITS WILLINGNESS TO FULFILL ITS CONTRACTUAL OBLIGATIONS.
THEY ALSO STRONGLY ADVISE RUSSIAN ISSUERS TO AVOID CONSIDERING EURONEXT AS A LISTING OPTION, IN VIEW OF THE HIGHLY UNRELIABLE NATURE OF QUOTATIONS ON EURONEXT EXCHANGES.
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