- By Region
Polymetal and Evraz have become the first Russian groups to be admitted to London’s FTSE 100, in a boost for other companies from Russia hoping for inclusion in the blue-chip index as they seek a more stable investor base than their domestic markets offer.
Polymetal, a gold and silver miner, and Evraz, a steelmaker part-owned by Roman Abramovich, are to enter the FTSE 100 on December 19. Uralkali, a potash producer, and Eurasia Drilling Company, a former subsidiary of Lukoil, also have ambitions for FTSE entry.
The companies’ admission coincides with politically driven volatility on Russia’s domestic market after Sunday’s parliamentary election, which was marred by claims of widespread fraud. On Tuesday, a day after thousands of angry voters took to the streets of Moscow, Russia’s RTS index dropped 4.7 per cent while shares in Sberbank, the country’s biggest lender and a Russian blue-chip, fell 4 per cent.
According to a senior western banker in Moscow, the recent unrest and political uncertainty is likely shut off Russian groups’ ability to raise equity in initial and secondary public offerings until the second half of next year.
“After the latest election hiccup, I think [the uncertainty] will probably dampen investor appetite for any stock until the full election cycle is over,” the banker said. “At the first sign of problems in Russia [investors] run for the exits.”
Entry into the FTSE indices could help Russian groups avoid some of this volatility. “If you are Evraz and trade in Russia you are part of the Russian universe. If you trade in London you are an emerging market minor, which allows you to drop the direct link to Russia,” said Steven Dashevsky, a fund manager at Dashevsky & Partners in Moscow.
But the next Russian wave is likely to face an even tougher time gaining admission than Polymetal and Evraz.
A public boardroom spat this year at Kazakhstan’s Eurasian Natural Resources Corp, a FTSE 100 company, left some investors questioning the strictness of the criteria for FTSE entry.
In the past some companies have sought, and received, waivers from the free float requirements that govern admission, and FTSE – a joint venture between the Financial Times and the London Stock Exchange – has begun to review the rules.
“There is a rush to jump on the last wagon leaving the station,” said Mr Dashevsky.
Polyus Gold, another Russian miner, has already found itself caught in the crowd. The group tried to secure a premium listing on the LSE – a precursor to FTSE admission – alongside Polymetal and Evraz this year. But its request for redomiciling has been temporarily blocked by a foreign investment commission headed by Vladimir Putin – a reminder of other obstacles Russian groups can face at home.
After yet another delay for the listing last week, Polyus’s chief executive told the he was unsure when the company would go ahead with the listing.