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Investors don't buy Russian shares looking for small gains, they do it to make a killing. With that potential comes high risk. That's why Russian companies like steel giant Severstal are flocking to the London Stock Exchange. Some Russian companies hope their sometimes shaky reputations will be steadied by listing on the LSE. But there are worries that investors could get burned because not all LSE rules apply for non-British companies.
The problem is most people don't understand the different rules applied to these overseas companies and I think that if there is a problem with one of these overseas companies collapsing, there will be a big scandal.
The LSE notes that these Russian shares and other so-called GDRs are not sold to individuals.
These are products that are, are designed for the professional market, so for professional investors, institutional investors and, it's no surprise that you'll see many of the larger global emerging markets funds, but also other funds are buying these, these GDRs.
And buying they are, $6 billion was raised on the LSE by Russian companies in 2005; that could top 20 billion dollars in 2006. The reason: London's cheaper and less regulated than US stock markets. But many Russian IPOs in the past 2 years have underperformed. And one planned billion-dollar float was pulled last month. That's why Severstal and other recent IPOs have been priced to sell.
Russian companies have been in the learning curve in this period, um, so the approach to IPOs has changed. Companies are now making more realistic assumptions in their prospectus and are much more aware of the need to follow up with investors.
Another worry is that so many Russian IPOs are tied to commodity prices, oil, gas and steel, prices that are now falling. But the LSE says it's now seeing interest across a range of sectors.
We're seeing the full flavor of the Russian economy. We're seeing retail companies coming to market, we're seeing telecommunications, ah, perhaps even in the next wave we may see technology.
In fact some 50 Russian companies have expressed interest in selling shares in 2007. Even though some analysts warn Russian shares are more for speculators than for investors.
Diana Magnay, CNN London.
learning curve (n.)
the rate at which you learn a new skill
Everyone in the centre has been through a very steep learning curve.
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