01 Okt 2004 14:38
01.10.2004 14:27:10 INTERVIEW-Investors scared of putting money into Russia-Mobius
By Elif Kaban
MOSCOW, Oct 1 (Reuters) - Emerging markets investment guru Mark Mobius, who has a long history of investing in Russia, said on Friday that portfolio investors remain scared of the country because of worries about law and order and minority shareholder rights.
The man overseeing $12 billion at Templeton Asset Management said he was unlikely to put substantial amounts of new money into Russia soon due to concerns about corporate governance.
"The big question mark for investors in Russia is law and order. And the judicial system and taxation and the court system. That is the key and they aren't getting any better," Mobius told Reuters.
Templeton's global funds, which account for $8.7 billion of total managed assets of $12 billion, are underweight in Russia.
Its main holding is LUKOIL (/LKOH.RTS), in which U.S. ConocoPhillips (/COP.N) bought a 7.6 percent stake this week and is tendering for another 2.4 percent. Mobius is a member of Lukoil's board.
Templeton's overall Russia exposure is now around $340 million -- down from some $500 million a year ago. That's below three percent of total assets.
GROWING CRITICISM
Mobius' remarks are a strong indication that the state's judicial onslaught against oil giant YUKOS (/YUKO.RTS) is having a longer-term effect on the Russian investment climate.
They come amidst growing international criticism of Russian President Vladimir Putin for undermining his country's fragile democracy and expanding the Kremlin's role in running strategic oil and gas companies.
Many business figures in Russia as well as bullish market analysts have rationalised the campaign against Yukos' founder Mikhail Khodorkovsky as a one-off punishment for his political ambitions.
YUKOS, Russia's largest oil exporter accounting for a fifth of domestic output and two percent of global output, has lost two-thirds of its value since the arrest of Khodorkovsky a year ago for tax evasion and fraud.
But Mobius, who has been investing in emerging markets for more than 30 years, fears Khodorkovsky may not be the last.
"The same thing could happen with any of these companies. It's a real gamble," said Mobius, who no longer holds shares in YUKOS.
"I don't see how the government can ignore the YUKOS situation. It's an ongoing thing. People have lost a lot of money, so there has to be clarity. Have you seen any announcement from the government about how they'll protect the rights of minorities in such cases? I haven't," he said.
"I'm not saying it's wrong to do what they've been doing to the oligarchs. But the problem is that along with the oligarchs are the minority shareholders that are being taken for a ride."
DIVERSIFY
Although Mobius said he was positive on Russia long-term, "we are a little worried about the current events. A lot will depend on how the government is able to attract foreign direct investment into Russia."
His investment management approach is value-based, studying a share's price relative to its long-term earnings potential.
But even though valuations on some of the Russian companies look attractive, Mobius said Russia was losing out to other emerging markets because of corporate governance concerns.
"Now, in emerging markets we are facing a lot of very cheap stocks in different parts of the world. You're better off diversifying and not putting too many eggs in one basket, particularly if that basket looks like it's going to be dropped somewhere," he said.
Mobius spends 250 days a year on the road travelling to far-flung emerging markets in search of bargains.
He said he had no plans to visit Russia in the near future.
© Reuters 2004
Man weiß ja nie.