Главной новостью вчерашнего дня, безусловно, стал приговор оппозиционеру Алексею Навальному. Пять лет по довольно «туманному» обвинению удивили даже пессимистично-настроенных наблюдателей. Ожидания, что происходящее в суде будет лишь попыткой припугнуть, не оправдались. Российские акции показали довольно внушительное снижение, но сегодня утром пытаются умеренно расти, рубль лишь незначительно просел, потери на долговом рынке также минимальны. Сезон отпусков и уже годами выработанная привычка к происходящему на внутренней политической арене – вот что спасло от более массивных распродаж.
Эффективность, наверно, единственно «работающего» госинструмента – судебной системы, – в принятии нужных решений была вновь подтверждена. Власть, вероятно, сильно не беспокоит, что слова о необходимости институциональных изменений и повышении эффективности разбиваются о стену, выстроенную из подобных дел, и она становится все выше и крепче. Власть предпочитает сценарий жесткого подавления, принцип fair play давно забыт и привычка к нему потеряна. Конкуренция – слова для программных речей и никем не исполняемых программ. Сигнал, что предпринимательство – это не сила, способная вывести страну из стагнации, рискующей превратиться в застой, а деятельность очень даже опасная для личной свободы и здоровья – отчетлив и понятен. Инвесторы и так уже потеряли веру в РФ, зачем же их еще раз в этом убеждать...?
While widely expected, many had hoped he would get a suspended sentence. A sad day for Russia. While little direct readthrough for the market, certainly negative for sentiment, and the Micex has already pulled back slightly. Protests planned for this evening are not sanctioned, so could see further pressure depending on what happens.
*PUTIN CRITIC NAVALNY SENTENCED TO 5 YEARS IN JAIL: IFX
He is detained in court, and the defence has 10 days to appeal the verdict. A gathering of supporters is planned for this evening in the centre of Moscow (not authorised), with the place already being cordoned off by the police.
Navalny, one of Russia's main opposition leaders, was found Guilty of Embezzlemnet thsi morning. Yesterday Navalny was officially registered as a candidate for Moscow mayor (elections scheduled for Sep).
*MICEX down 1.5% since the ann't
Navalny’s participation in Moscow’s mayoral elections is the central detail to watch now. His voluntary or involuntary (if the appeals court confirms the guilty verdict before 8 September) removal from the ballot could complicate the political backdrop in the autumn. Yesterday evening there was a sizable protest rally in the centre of Moscow. Although it had not been authorised by the authorities, it was contained, but not forcefully dispersed, by the police.
Russia managed to trade up from the open despite China -1% on back of negative IMF report, but as soon as news hit that Russian oppositionist Navalny was sentenced to 5 years in jail MICEX and RDXUSD collapsed both closing down 1% on the day. The combined cash volume was in line with average at $2bn between Moscow and London. The cash split was 53:47 slightly skewed to the buy side. In futures OI finished down 8%, with the bulk of the short covering happening by 10:30 GMT (read before Navalny verdict). Volumes in the Futures slowed down to finish 20% ahead of 5day. RUB was almost flat slightly weakening by 15bps against USD to the level of 32.38, while Brent gained small 10bps on the day to $108.55.
We currently don’t see and do not expect a strong negative reaction of financial markets, assuming there is no revival of large scale street protests, which seems unlikely. – In our view, most investors in the Russian market are already accustomed to the environment and recent political tendencies.
At the same time, the verdict against Navalny fits into the picture of a stronger grip by the authorities on the non-systemic opposition and the civil society after the re-election of Vladimir Putin as president and the drying up of the large scale street protest of late 2011/early 2012. Thus, it wasn’t completely unexpected to see such a sentence.
However, we think that there is also a deeper economic dimension to events like the Navalny case. It highlights tendencies in the political climate of the country, which are in our opinion counterproductive to bring the country forward in economic terms (i.e. provide sustainable and sufficiently strong economic growth). Rather, this kind of events can deter new real economy and portfolio investors and lower the propensity of domestic investors and to increase their exposure in Russia.
So far, the share of investment in GDP has been stubbornly modest, hovering at around 20-25% of GDP. Net FDI has been around zero for a long time. At the same time, Russia has been running high current account surpluses and increased external leverage in recent years. Presumably, instead of investing (more) in the country, the private sector is shifting money out of the country. For example, USD 1 trillion or 25% of all current account proceeds (mainly revenues from oil and gas export) have been funnelled into private sector foreign assets from 2002-2012 (cumulative outward FDI, increase of foreign assets of banks and corporations, BoP errors and omissions).
Moreover, Russia is currently going through a patch of weaker economic growth – many experts, including us; think that this weakness is at least partly caused by limitations on the supply side and thus of more structural or fundamental nature. According to this view, the Russian growth model is close to hit its limits (even with triple digit oil prices to continue to exist). A downwards shift of the trend growth in Russia from above 4% during the post crisis recovery (not to mention the 7%+ growth pre-crisis) to sub-par growth of 2-3% per year seems possible.
To prevent or at least ease such a stagnation scenario, Russia needs significant economic modernization – a major topic of Russian economic policy discussion for years. This modernization, in our view, has to be supported by improvement of the business climate and higher private sector investment activity – both goals of official policies.
In our opinion, also highlighted by the Navalny case (who before becoming a politician made his name on fighting against fraud and corruption!), a significant improvement of the business environment looks less likely. Thus, a low growth outlook becomes more realistic.