Russia & CIS
The recent perturbations across EM assets, the looming shadow of current and potential new sanctions and subdued growth at home have taken a toll on the Russian financial sector. But prudent fiscal and monetary policies and timely actions to minimize sanctions impact have helped shelter banks operating in Russia and the CIS from serious damage, DCM bankers and corporate chiefs have told Bonds & Loans off record and on the ground in Moscow.
The Russian Central Bank tentatively confirmed that the banking sector is experiencing a dollar liquidity deficit. In an apparent push to de-dollarize the economy, it may for now resist from intervening, hoping to encourage more local currency borrowing. But inaction could pile additional pressure on the rouble in coming months.
It has been a tough start to the year for emerging market bonds, but things are looking up as we head into 2H 2018 – you just need to know where to look.
The Russian telecoms giant became a trailblazer in issuing distributed ledger fixed-income instruments this spring with the private placement of a RUB750mn commercial bond using blockchain-embedded smart contracts. Alexander Smirnov, Head of Corporate Finance and Treasury, Mobile TeleSystems PJSC, explains how the company worked with Russia’s National Settlement Depositary and Sberbank to achieve this milestone.
By late 2017, to the surprise of naysayers, the Russian economy appeared to have successfully navigated a challenging sanctions-riddled period and by Q1 2018 was looking to be one of the better EM stories on the market. But the latest escalation in tensions with Washington, along with broader EM outflows, have seen the country’s issuance pipeline dry up even as economic fundamentals remain strong, especially relative to the struggling peers like Turkey and Argentina.
Following up on its recent “double bill” international bond, the former Soviet republic hit the market again at a tough time, but the notes proved popular with international investors and saw some of the highest oversubscription levels in the sovereign space over the past year.
The common denominator linking the US Trade War with China, sanctions against Russia and the attacks on Syria was that there were no attempts made to find solutions to these conflicts within multilateral institutions, such as the UN and the World Trade Organisation (WTO). The word used to describe the act of seeking justice outside the formal framework of the law is vigilantism. Vigilantism leads to abuses of power, miscarriages of justice and insecurity. The descent into vigilantism will make the world a less safe place.
Renaissance Capital has in the past two years overseen and participated in a significant volume of DCM deals out of Russia and the CIS, positioning itself as one of the top dealmakers for Russian corporates looking to tap the international markets. Dmitry Gladkov, the Global Head of Financing at Renaissance Capital, shares his assessment of the market and the bank’s role in it, as well as his vision of where the investment bank sees the biggest growth opportunities in the coming months.
The Central Asian Republic saw 9x peak oversubscription and impressive yield tightening of nearly 900bp with its inaugural Eurobond transaction to source funds for the construction of the world’s tallest dam.
Just a few years ago, barely any debt capital markets investors would have paid much attention to regions like Central Asia and the CIS. Yet with overwhelming demand for sovereign notes issued by the likes of Belarus and Tajikistan, regular issues from Kazakhstan and a highly anticipated debut Eurobond from Uzbekistan, the region is putting itself on the EM fixed income map.
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18 Oct 2018