Debt market participants commemorated the anniversary of Lehman Brothers’ downfall at the II Cbonds Russia & CIS Fixed Income Conference in London

21.09.2011

The second Cbonds Russia & CIS Fixed Income Conference took place on September 15-16 in London. Last year, the event was attended by more than 170 people from 14 countries. Among the delegates were representatives of regulators, borrowers, Western funds, Russian and international investment banks.

Presentations of macroeconomy experts made a worthy opening of the Congress (which coincided with the collapse of Lehman Brothers). Representatives of the leading analytical teams - VTB Capital, BNP Paribas Bank, Credit Agricole CIB, Bank of America Merrill Lynch - spoke of persisting risks of global recession. Situation in the euro zone remains the key point of suspense, which is keeping all markets on tenterhooks. "Euro zone is a straitjacket for a madman", said Neil MacKinnon, Global Macro Strategist at VTB Capital. "All actions discussed today by the leaders of European states are misfires. We need real mechanisms to recapitalize the banks. Default is a dangerous contagion. There are serious risks that it will spread from one European economy to another."

Conference participants noted that on the dark background of the eurozone emerging markets including Russia are looking more like a bright spot. "There is available liquidity in the markets, and we it should be used. The trick is to choose the right window. This creates good opportunities for Russian borrowers", said Dmitry Alexeev, Vice President of Barclays Capital. "In 2012 - 2013 we will see more issues in exotic currencies, such as the Swiss franc, British pound and ruble."

Growing investor interest in emerging markets is fueled by their desire to wait out the storm looming over developed economies. One of the main advantages of EM is low debt level, agreed participants of the panel discussion - representatives of international funds. However, despite the role of the global economy driver, which the emerging markets are trying to play today, substantial risks of investing in EM assets are obvious. "How will Russian bonds and CIS securities behave, if we see a repetition of the 2008 scenario? Will the regulators support the markets or will exiting investments be the only solution? In this case, nothing could keep investors here: they will sell everything," said Gleb Shestakov, Managing Director of Global Fund Management.

One of the central themes of the conference was infrastructure of the Russian domestic market and direct access to it for non-residents, which will become possible from the beginning of 2012. According to Konstantin Vyshkovsky, Director of the Public Debt and Public Financial Assets at the Finance Ministry, this measure will increase liquidity of the Russian public debt market and bring conservative investors who are primarily focused on long-term investment, and are not in search of arbitration. However, regulator acknowledges that a number of infrastructure problems remains: OTC market is non-existent, there is no central depository institution. In addition to inefficiencies and expensive infrastructure in Russia, which repel the non-residents, foreign players still have no adequate understanding of what risk premium they will get, and whether these investments will be liquid.