What a difference a couple of months make. The RTS has fallen by half since May, when it led the world. Due to declining oil prices, increasing inflation, slower industrial production, the Prime Minster's comments about Mechel, the TNK-BP dispute and events in South Ossetia, Russia has gone from being a sure-fire investment destination back to an increasingly risky bet.
A few months ago, Russia was hailed as a "safe haven", immune from global market turmoil. That idea has been shattered. External factors have had a direct impact on Russian markets. The global banking crisis has spread to Russia, as exemplified by the perilous status of KIT Finance.
In this context, the challenges for Russian companies seeking an international listing are huge -- but the challenges are surmountable in the medium term.
And while this may be the worst of times, it may prove to be best of times for Russian companies to regroup and consolidate their plans for an international listing.
Stepping back from the current turmoil, Russian companies have been key drivers in the global IPO market, building from VimpelCom's $111 million NYSE listing in 1996 to topping the European league with 23 IPOs raising nearly $30 billion across international and domestic exchanges in 2007. They will be leaders again when the credit tide turns.
The credit crunch is global, not local. The world market for IPOs is seriously curtailed, Virtually no company, anywhere, is seriously considering tapping the international equity markets.
The increasing number and size of Russian IPOs has reflected the rapid development of Russian companies, not only in terms of financial results, but also in terms of corporate infrastructure and governance. This new maturity opens new possibilities in terms of fundraising opportunities. Russian companies are able to start looking further afield and select a capital market that best suits their needs. This is happening already with rumours that some companies are considering listing outside of Europe and the US for the first time in Honk Kong.
But whatever happens, Russian companies must not forget the hard-earned lessons that the real value is gained by transparency and corporate governance. International investors will be even more discerning about where they put their money and they will have a lot of choice, globally.
To paraphrase Tolstoy, good companies are all alike, but every bad company is bad in its own way. They will be looking for good companies.
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