VTB Turns to Africa to Grow Cash-Equities as Russia Demand

Thursday, 2 October / Bloomberg

“We’ve seen reduced appetite for Russian risk for some time now,” Mark Richardson, acting global head of equities at VTB Capital, said in an interview in Moscow yesterday. Sub- Saharan Africa “is where we see an opportunity to differentiate ourselves and add real value to our clients,” he said.

VTB Capital, whose parent is under sanctions from the U.S. and European Union, plans to double its cash-equity flows in global markets including the Middle East and developing Europe to 50 percent because Russia is “out of favor,” Richardson said. The penalties have curbed Russia’s access to capital markets, sparked capital flight and weakened the ruble to a record. The International Monetary Fund yesterday cut its previous Russia 2015 growth forecast in half to 0.5 percent, citing the standoff.

The benchmark Micex Index, which is denominated in rubles, has decreased 6.9 percent this year. That compares with a gain of 0.8 percent for the MSCI EFM Africa Index, which is comprised of 90 stocks from nations including Kenya, South Africa, Nigeria, Togo and the Mauritius.

About 30 publicly listed companies in the region have “decent liquidity” and are “known to international investors,” Richardson said, without naming the shares. Stocks in South Africa, which has the heaviest weighting on the regional MSCI gauge, are up 5.7 percent year-to-date.
Africa Expansion.

Expanding its business in Africa could help VTB Capital widen its client base to include frontier-market funds, Richardson said. The brokerage is eying offering cash-equities execution in Zambia, Zimbabwe and Botswana, and can currently offer its services in Nigeria and Kenya, he said.

The ruble has depreciated 17 percent against the dollar this year, making it the second-worst performer among 24 emerging-market currencies tracked by Bloomberg after the Argentine peso. The dollar-denominated RTS stock index, which entered a bear market this week, has fallen 22 percent.

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