to discuss this i'm joined by the term i keep of he is head of macroeconomic analysis and research at unicredit bank russia been heiress he is the editor in chief of business new europe we also have david kranz feel he is a partner in c.m.s. and simon sent him fletcher he is a portfolio manager with renaissance asset managers ok out of time i want to go to you first in china it's the year of the dragon will this be the year of the bull for russian equities with things so we expect quite a significant growth rate of the russian equities for this year at the bar to have to twenty five percent or something like that of. things of these here can be quite strong in terms of its on the members as well ok even when you think. i agree i think the market is extremely cheap and why cheap well because it was going to december ok reisa cheap it's cheap i mean for a number of reasons i mean of course we were doing our outlook and never has been so confusing i mean you've got a potential meltdown in europe and at the same time domestically this sort of

resurgence of political risk such as it is consequently the investors have all stepped back and waiting to see how it plays out and again with the presidential elections in march i think a lot of people are waiting until that's passed and then then they should come back because if you look at the fundamentals in terms of price to earnings it's very very cheap it has to be live by well there are a lot of unknowns but i mean if you're if you're fairly confident there's not going to be him out in europe western europe then you know you're looking at minimum twenty five percent and some of the other brokerages talking sixty percent returns this year and it depends on the you know if you compare it to oil prices ok you get your covering to me. like about the euro you know is only an oil prices what about you david i mean you optimistic about our russian equities this year and i guess maybe compared to what i think i'm optimistic this year i mean if you look at last year there was a falloff in inward investment in the second part of the year but in the first half

inward investment was very strong we've done some analysis of emerging market now shows on a number of deals basis there was a there was a very good climb during certain the first half of last year so it shows that the fundamentals are good interest in russia is there and although there was a telling off in the second half which may be for a variety of reasons and probably to do with western european sentiment largely there's no reason to suppose that that that that that trajectory wouldn't continue this year once as others have said the political stability position becomes clearer if you will talk about political stability a little bit later simon i mean when you look at the emerging market world where do you put russia is at the top bottom in the middle. well i mean russia is not my island i mean it is without well within the globe the global economic sphere and should the rest of the world i mean you mentioned europe take a tanking russia washer will be severely affected russia is unique in. the global markets perceive it to be. have much more of

a corporate governance discount it's often the political risk is of often seen to be huge whereas i fundamentally agree with ben you know the the opportunities for russia are quite large i mean we see fundamentals giving to a pointer to a large cyclical rebound ok i do too much if we were to look at you know sectors and companies what sectors do you think investors are most interested in this year in the equity market and i know there's a lot of issues like oil prices and things like i've been a bit taken in consideration all these issues what sectors are attractive well or preferred these are sectors that are oriented on the mastic demand so first of all this is telecommunications so this is because you're a cyclical basis we're more neutral on banks. where positive funds are going to patients are up then what about you well looking across what everyone's saying for this year is very much going to be a year of two halves and in the beginning of the year while europe deals with its problems all the banks are recommending defensive stocks you know things like that

are not affected by crisis like in a consumer what have you and then the second half of the year should be when we sense go forward you know go back to the fundamentals and then people are talking about value stocks growth stocks things like spare bank. read estate companies that should do well as the economy picks up but more importantly as the sentiment you know as this fear there's dogging everything at the moment starts to fade so you see an easter is you know rush of market is extremely seasonal so typically around easter there's a switch when the new money comes in the new allocations come in and the economy should pick up from that point and i think everyone be switching but it will also be. the point we'll see fresh money coming in from outside the camp david what do you think about that i actually came across the same thing everyone's looking at this year's two halves ok wait and see first half second half should be a lot more growth what you think about that i think the wait and see thing is an obvious factor for this year because of the because of the environment we're in i

think that the consumer market is i think widely recognized as being the big opportunity there is consumer debt inflation is very very steady coming down so i think that the consumer market is going to be the main opportunity . ok simon i mean is it when you look at what's going on here i mean it's talking about the domestic story here are you just as confident about that i mean again all things being equal we don't when we look at the eurozone we look at the problems with the u.s. economy and we also have an election in the united states well i mean the great thing is i mean the election cycles all over the world we've got us we have china obviously we have russia here domestically i mean one of the things that i think we are overlooking is russia has the largest loan growth across across any country we have spare bank with our returns on equity that are phenomenal in comparison with not just russian russian competitors but international competitors so sectors i mean there are some really exciting sectors to to to invest in the short term as

well as over the over the over the whole year and from from from a wait and see perspective i think we have not overlooked the iranian oil situation and obviously with any spike in oil prices is only beneficial to the russian market as we've seen we had severe outflows of capital last year. have been in flows of capital into gems recently but russia as our underperformed in that of the flows have not been as large as they should have been on a pro rata basis you know it's interesting so when you when you would jump in there because i have to say that i was going to ask everybody no oil price what does that have to do with russia prospects for this year go ahead i mean david mentioned before that there's a prospect of a crash in europe which would bring oil prices down which would hurt russia but i think the chances of an oil spike are also quite high i mean you've got unrest in nigeria you've got a growing tension in the middle east in the persian gulf and if that gets worse then it's going to send oil the other way i mean it remains huge on having said that the oil demand continues to rise although it's going to be relatively flat

we're at about ninety million barrels a day but although you see demand in europe is already falling from forty to about thirty five but it's being compensated by the new world where they're up to you know forty five to fifty already and so the new world has to overtake and at the. at the day this crisis is a european crisis in other words the emerging markets are continuing to grow there we're continuing to consume more and more oil and this will give support to the price of the scenarios where oil goes to sixty seventy dollars i don't see it i mean i can see. saudi arabia probably won't let that happen no they're not going to break even like russia or very least eighty dollars and so i mean that puts a fairly sort of on it so we know it's going to affect the market there is some downside but it's not a very big drop where is the upside is huge still i don't know what about oil prices i mean you tend to give a very good amount of i would say middle case where we know we have an oil spike

that would have a drop in price here but i mean what prices russia need to keep its equity markets point well for us for this year is one hundred twenty dollars per barrel good that's high yeah that's the pretty high and the reason why we expect the i to fall on one hand you're completely right that there are lots of positive signs from the coming from the china and other countries they continue to grow pretty fast however the the reason why we think that the growth rate of the market could not be that higher as could be expected is that we have lots of issues here inside the country first of all if the european union is the largest trading partner of russia so any kind of problems there will definitely lead to issues in the local markets on one hand on the other hand what we see here is. the growth rate in the oil does not automatically mean growth rate the vocal markets because for instance in two thousand and eleven we saw

a pretty huge of care but all accounted to eighty four and plus billion dollars so this is one of the highest numbers we saw ever in this country and this special this is one of the more than comparable with what we saw in tucson eight in the well it's very interesting david if i can go to you i mean is the oil price issue for russia's equities and economy in general over rated or under rated. i think there's a i don't think there is a direct connection between it and it's obviously very important for russians g.d.p. because it mainly accounts for that. i think that. i wouldn't think it is a major impact on the stock prices in general it is a major factor for russian russia's g.d.p. which is largely linked to that i think there's general confidence in the in the price in the oil price ok so i mean i think i think it's interesting because i get to going back to what ben said i mean he's kind of even it out when we look at the risk around the world but while prices but because of growing demand it's good him it balances out more or less right now i so i think the oil issue should be really

kind of lowered is a level issue of importance when we look at russian equities for this year well i mean obviously we have. russian government trying to diversify away from oil and gas i think when the rest of the world looks at russia they automatically lead to the oil price and it's that perception of russia being our oil and gas cut country that now if prices declining then there's a there's a lack of confidence in investing into into russia which needs to we need to move away from that obviously you know we've seen the rise of the russian consumer and the russian consuming comparison with their brazil india or or china spends huge amount per person i mean the average g.d.p. consumption is over eleven thousand dollars here now whereas china china or india is far below that level then you would jump in there two points we should remember the russian stock market tends to track the oil price fairly closely and we're in a unique position here for the first time that the stock market is trailing behind

the oil price in other words the implies the price of oil of something around sixty dollars in other words stocks have priced in a huge crash in europe already sort of oil prices for it's already priced in which means is that reality closes between the price of play we're going to continue our discussion of russian equities after a short break we'll continue stay with r.t. . it was shot four times in total in the airways it world. series aboard so still in my body. and people should be allowed to defend themselves were they own guns in the hands of law abiding decent people are

not a problem national rifle association there's a group of basically retired military we love to shoot holes and i'm sorry if you know that the bullet comes out here and this makes it go bang and if what's in front of here is going to die that's all the training you really really need raise your hand if you know something's been. ok but to live without one of the philadelphia only service streets. until about a hopefully we will never have to use the weapons for self defense but we should be prepared for the full class including the teacher assemblers. seventeen students and a surgeon and one of seven or still. we

have seen the damage it has done to our environment mark and we call it what the park props we do not want anymore new dmoz. our core system is just that was abysmal experience and i'm just just appalled that that's allowed to go on america. eating this unfortunately because we don't know what's in it there's no labeling there for it being used like a board to experiment being used as guinea. well now we have more. than we have had to guard. like. a soulless substance. like.

villages in ruins. for thailand where time stands still. all becomes a scene of nothing. the mysterious sons of russia. are to. welcome back to on the money i'm peter all about let's continue our discussion on the outlook of russian equities in two thousand and twelve but first let's have an overview of the russian market. and that is to run into about the future mood on the russian equity markets experts predict that the main economic indicators will reach all time highs as the markets get back on track for steady growth in two thousand and twelve however not everything is raese for the russian market after

the recent protests on the back of the parliamentary election some investors pulled an estimated eighty billion dollars from the country that is equivalent to about ten percent of the russian markets diminished capitalization as a result the ruble denominated money segues has fallen by more than ten percent and the dollar is nominated m.s.c.i. russia index has fallen by thirteen percent since the election traditionally cheap because of its reliance on oil and minerals explodes russia has grown even cheap the still its equities are now fetching less than five times earnings however such low price multiples likely mean that may just sell. and as long as international oil prices everitt roughly one hundred dollars a barrel russia will continue to find itself in a better position than most the combination of high oil prices and rising government expenditures suggests that russian stocks could be set to rally next year. we should make the russian market convenient for equity issuers and create

technologies that will make investment easy and convenient for the domestic investor in this sense the exchange should become a center of self-regulation and involvement in the establishment of financial markets together the stock markets of brazil russia india and china have all the s. and p. five hundred index by more than four to one in the past decade and their economies have grown four times faster than america's and stop contras to russia and the other breaks the u.s. and european economies are presumably headed for another year of stock market volatility high unemployment banking industry up evil and we causing greater that could be something for a floor for response in this question because of difficulties who is going to this and europe clearly have chosen to office local to be very careful will be ready for that because the going to be able to not only economic but also political certainty and war so you will have states ready to lecture us in the states or france or

other places is one of the few fully functional economies left in europe russia is poised to see foreign investors eagerly jump in the balance on the stock markets may first be tilted in favor of the leading developing countries and should attract more investors to russia the country's economy is therefore expected to grow at a more trick pace there can only upswing which in some three and a half to four percent in two thousand and twelve and your dinner on the money. ok so what i'd like to go to you go back to you one of the things we. talked about in the first part of the program is the reliance on the air price but what about the issue of china and what how much is russian eric was going to move one way or another depending on economic performance in china this year well again it falls into the performance of the whole of brics i mean if as china performs well then the whole perceived nature of investing in emerging markets becomes more acceptable obviously china is having it having has a. new government forming in china has had

a slowdown but we know we've had a slowdown from over nine percent to just under nine percent obviously the one who can complain about that ok it's actually going i'm sure our profit friends in europe would be leaping all over night like ninety nine percent so yeah i mean is it is it a slowdown in china i mean you know it's nine percent is just outrageous and not just china we see greater china countries as well experiencing six seven percent growth levels so in that context if russia grows at three and a half four percent that's an under-performance it's something that you know the political elite within within russia need to address that's very interesting if i don't go back to you david do you think russia's economy is underperforming and if it is what needs to be done to change it. well the russian economy seems to form performing reasonably well i think one of the things which is probably affecting confidence in russia is is the significant spending i mean there's been

a huge expansion of the budget in the lead up to the call it lead up to elections maybe this is all going to be paid for and therefore i suspect there's probably a wait and see to see how the how the budgets going to be financed there's been a significant imposition of employment tax and i think we'll wait to see how that affects business in russia whether it be some form of restructuring before we go forward. so i think i mean the economy seems to be quite well set as as the as the report said it's better than western economies and therefore there's plenty of opportunity but there are some issues which i think that people are waiting to see how it's going to be addressed by the administration at the moment is not very clear how they will be ok let's talk politics here ben what do you think the new duma ok. more contentious is certainly not going to be the same it is certainly not the same duma that we had before with united russia now there's a little bit more contention in there of more competition is that good or bad for equities. it's good we need a discussion i mean the trouble with having you know political power concentrated

in the hands of a few people who stay there forever is that you are so fight the system and then it becomes increasingly inefficient to shake things up a bit is important we've always had a debate in russia between the liberal camp from st petersburg and the sort of the key you know the origin of mickey from the old system and now that's been his touche allies a bit more but nevertheless you know we still exist within this managed democracy i mean we've taken a small step towards greater democracy but we sort of step yes i think so i mean any any increase in debate is a good thing i mean the critics would argue with justification that we should go a lot faster in that direction and i think with the presidential elections coming up you know last year everyone was assuming putin was going to sweep in the first round i think we'll see much more of a debate this time i think we'll see two rounds in the election and again it'll be another step forward if you investors like i said there you see more debate you know that at it's very interesting it is counter-intuitive isn't every day they

would prefer not to have that you know it's very good it's good for society but not necessarily good for business in the long term it's good because you get progress and growth in the short term increases the unknowns i mean you have to realize and remember that you know since putin's we've had twelve years of a political mill pond you know it's just been absolutely flat nothing's stability no debate as an investor that's very easy to work in so much as you just look at endings and growth and now you're going to shake things up and things could change then the uncertainties have increased and so in the short. unsettled term what about you and what political risk because this is one of the things that western media will talk about and not necessarily business media but news media in looking at russia i mean political risk good bad in the middle doesn't matter well in fact i think the political risk crusher is not good at the moment because we have lots of things to. be done and on one hand we need some change but within the chain. israel is not by only seasons but also but politicians are also authorities as well

on the other hands any kind of release in terms of. certainty is their family will be negative because of that will we have no at the moment we don't see any kind of alternative when we're working out of time as you look at the aerating some of the top of the of the most important political berating of which is about fifty percent or so who can be instead of like so gone that he has political reading of the less than fifteen percent are the voice of even less so who can who can we instill in third of right now that's a question so in case if we want to the economy to continue to work well and investors to be more or less pretty sure of what was going on in the country what we see is of more political stability in it interesting so i mean if i go to you i think it's interesting that maybe at this point you know the political risk is higher than we've seen over the last twelve years but that shows movement forward and shaking up the works as ben pointed out here and there in the in the end that's

a net positive because you see a system that is reacting to social attitudes i mean absolutely i mean the recent protests there or to the growing protests on the streets of moscow are definitely beneficial beneficial to not just a democracy but beneficial to the perception of russia around the world what i'd like to see is that the the protest movement moved within the duma so we were having a lot of positive words come out of the duma from various parties but we actually we haven't seen any any real action and you know there are a lot of things that can be moved forward and it's not just within the political parties but we need to see that move into legislation we need to see corporations adopting a just a different attitude as well in many respects interesting david what do you think about that the bar the level of political risk i mean is that in the law in the longer term you think this is a positive development is happening in this country right now i was very positive and it's very good news actually and i think that there's always. western sentiment is that is always a different thing from what actually happens on the ground and i think that

westerners investors are looking with a certain amount about prevention of what about what's going on in russia but it's largely based on what they see on television screens i mean this isn't the protest movement isn't isn't a sudden sort of. change of heart amongst the russian population has been protested in a consistent development process and the protests in the country over the last number of years it's just been rather more kind of human rights based on what's happening now is a more sort of person although in a more frustrated expression of people's feelings is not as if the opposition wasn't there before and i think that what we're going to see what we are seeing is actually the kremlin being more responsive to that i think that they will be concerned to try and address. the evils which is which are consistently talked about in the russian and in russian political establishment and i think that's a very good thing i think actually business looking at a political situation which is inevitably going to be stable for the next few years if you know who's going to be the next president but at the same time with an

articulated force asking for more parliamentary democracy more of a discussion more responsiveness more of. a willingness to address the issues which the line behind the very good fundamentals to make sure the fundamentals remain good and sound i think is extremely good and i think once we get through that this period of of of uncertainty and wait and see i think it's going very good for the russian economy because i think investors will get confidence then with the last word go ahead i think we should emphasize that there's no chance of a russian spring in the style of north africa i mean there you had a large population twenty five percent of the population under twenty five who are unemployed and poor russia's revolution such as it is the middle class people are older and ironically the people have benefited from this fog and it's not borne out that anger is born out of frustration with bureaucracy and corruption and they want more accountability but they don't necessarily want to change the government or any ok i want to take my guess. here and thanks aware of us for watching us here on in the money see you next time and stay with our team.

syria's divided opposition groups argue over who represents the voice of the people but opinions clash at the u.n. security council with a new resolution against syria drawing harsh criticism from russia. thousands of angry protesters in warsaw cry out against an international online. claiming it targets the basic rights internet users. takes yet another pounding this time with credit rating fitch downgrading by more european nations with its leaders

trying to soothe concerns that the world economic forum in davos. on air and online you're watching r t now russia has opposed a new arab european draft resolution on syria saying it can't be used as a basis for resolving the crisis the country's ambassador to the u.n. says moscow will carry on searching for ways to end violence there. has been following the latest meeting at the u.n. security council in new york there has been a lot of discussion taking place primarily because our european our draft resolution was circulated to the u.n. security council members in which it calls for the syrian president bashar assad to transfer power to his deputy while a unity government.