Post election, bulls insist Russia still a good prospect

The result of Russia’s latest elections have polarised commentators and investors: those who were always bullish about the market insist that although the results are disputed, nothing has changed regarding the positive longer term outlook. They even suggest the dissent indicates maturing political attitudes, and improved democracy.

Critics say the carefully constructed appearance of public participation has been punctured as voters refuse to be hoodwinked by political subterfuges laid to get them to believe they have a democratic voice. Because of growing unrest, the outlook for development and investment has deteriorated.

The results of the December 4 parliamentary election was victory for the ruling United Russia party, even though official statistics showed support plunged from 64.3% of the vote at the last election to just over 49%. Extremist parties all did better, but the surprise result was the gains by the A Just Russia party, originally created as fake competition to United Russia. It received 12.8% of the votes, up from 7.7% in 2007.

In response, the Russian equity market fell, along with the rouble, as street protests in Moscow grew, culminating in a weekend rally where tens of thousands alleged vote-rigging and called for a new poll. Some strategists said the unrest should not be discounted as trivial, while others insisted that the market had over-reacted.

Marcus Svedberg, Chief Economist at East Capital, noted: “United Russia should be able to continue to rule but the election results show the electorate is growing increasingly impatient and frustrated with the ruling elite.” Prime Minister Vladimir Putin, who is set to run in presidential elections in March, has promised “significant renewal” of party officials in key government posts, but also a response to demands for modernisation.

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