The upcoming election
Interview: Alfa Bank---Weafer, Chris---Chief Strategist
>> ford and suppliers plan to hire 600 workers on top of 1,000 new jobs that were previously announced.% the c.e.o. said new hires will be located at ford’s chicago plant and suppliers facility nearby. the move comes as third largest auto maker refits that facility to boost sagging sedan sales of ford taurus and mercury sables, hoping new models will boost profits by as much as $7 billion. today we’re announcing an additional 4-60 new jobs added to our chicago assembly plant and its supplier part campus. that’s in addition to the thousand jobs that we’ve already announced.
>> the chicago plant will reflect a switch to what they’re calling flexible manufacturing, which let’s more―let’s company make more models at the same factory. shares of ford are up 13% this year. our next guest is the chief strategist for russia’s largest nonstate owned bank. 2003 was a phenomenal year for russian stocks up as we said 71%. he says this year will be a year of transition for russia. expects some choppiness in the first part of the year, chris, chief strategist at alpha bank joins me here in the studio. transitional year, due to the upcoming election with president pution other reasons?
>> part of the transition. when president putin became president four years ago he came in with a mandate to change the country’s economic focus, ee zone lly four years ago russia was very heavily dependent on commodities, oil particularly. four years ago he said about a process which will eventually lead to a more battled economy wealth distribution. this is a year where where we see the transition where over the last tower years the investment case for russia has been based on high commodity earnings, the government are now about to launch revised industrial and budgetary policy which they hope will lead to strong growth in the more domestic sectors, those to achieve the ultimate game of reduction―increase in income disposable income and more balanced economy.
>> let’s talk about risk. you really got to want to be willing to take some risk to get that optimum reward in rusha 70% returns like last year certainly going to turn heads. are investors becoming numb to the risks? it seems like we’re seeing still a lot of political pressures on companies, a lot of volitility and changes, deals made and broken.
>> no. actually in fact what we’ve seen is investors becoming much more sophisticated, much more aware of exactly what is going on in russia. not taking just headlines value but looking closely. what they see is the government has secure strategy for restructuring the economy, that obviously will involve some, not so much risk but valuation issues, for example, the oil sector which is the cash rich source―the cash source for the economy. the government has said that they will increase taxes in that sector in order to pay for incentives else where. the risks are more to do with valuation. there are no longer the risks that one would associated with russia of say four years ago after crisis where there was a lot of corporate governance risk or risk that you would lose your assets. we’re progressing up the curve, more to do with how do you value assets at this point.
>> well let’s talk about valuation and what not. because some people say that there’s a bubble in the russian markets simply because there’s by some estimates 50% more money chasing fewer stocks due to the rent takeovers.
>> that actually is one of the technical factors in the market. the free float available for investors is relatively small. it’s about 26%. or about $50 billion. we have seen the substantial% increase in the amount of money not just coming in by way of mutual funds or foreign investors but also within russia itself. we have seen substantial build up in liquidity with not a great deal of assets for that to buy. at this point we don’t see there’s a bubble, we actually calculated the market now reached fair value. we do actually anticipate that perhaps in the second half of this year if we get through the next several months where a lot of issues associated with transition will be clarified and if they are clarified as expect favorably then we would expect market to get over valued or to reach substantially higher valuations in the second half of the year.
>> putin has really no chance of losing, does he?
>> no.
>> that’s not really a variable in terms of what is going to turn around the second half?
>> no. but investors getting back to what investors are looking at in terms of risk, they want to see what will be the valuation case for russia going forward. there for they want to see exactly what will be the transition program. how will the government shift resources from the successful oil sector and how will they apply it to create growth opportunities in manufacturing domestic sectors.%
>> we’re under―we have 15 seconds. what do you make of this investigation by the government, more politics?
>> to a large extent we have seen since the start of the investigation a few months ago as lot of government agencies taking issues to investigate businesses. but in the end of the day the company have said that they are pretty sure that the core process will end this without any problem.
>> thanks very much. we wish you well, thank you for joining us here, he’s the chief strategist at alfa bank. also coming ahead on this program, one of the most important congressional committees to the business world at least is about to have a major overhaul. republican top spot of the house energy and commerce committee stepped down.
