Psychotherapy for investors

The economy is in a state of constant expectation, waiting for the latest political conflict to be resolved, waiting for the oil price to stabilise, waiting to see which direction the markets will take in the opening minutes. It's a nerve game, an anxiety economy. Still the financial measures taken by Russian authorities have worked. Already $150bn has been pumped into the system. And new injections are expected. Bank deposits up to 700,000 roubles are guaranteed by the Government.

As far as the stock market is concerned, everything here is dependent on how the liquidity crisis is resolved. At present this mechanism of injecting liquidity into the market doesn't seem to be the correct one. It seems that this is rather the result of a certain climate. The main underlying factor is investor expectations, and their forecasts for the future. Foreign investors playing the Russian market have seen three signals over the past year, and these signals determine investor confidence.

The first was the end of inexpensive credit lines as the US economy was rocked by crisis, after which the first stock market slide began. And then came the Georgia conflict which shook Russia's relations with the West. Finally there was talk about Russian companies having trouble repaying foreign loans, followed by more capital flight and declining indices.

Taking a clue from their foreign colleagues, it appears that Russian investors are also beginning to take their money out. Stock market indices reflect investor confidence in the country's economy. As sad as it seems, our state of affairs does not incite optimism among investors. And judging by the situation on the stock market, they don't expect stable positive trends here. But this is enormously unfair for Russia.

The forecasts of the Ministry of Economic Development through the year 2020 are very optimistic. However, today it is psychologically difficult to believe this. Nonetheless, these goals have been made and the tasks set, with mechanisms being put in place to achieve them. But what do foreign or even most of our investors know about this. Nothing or only very little.

As soon as Russian authorities begin to speaks publicly about the measures being taken to stabilise the financial market, the stock markets start rising. Keeping silent creates panic on the market, despite the fact that the economic fundamentals remain strong, and a lack of understanding of the measures that the state is taking.

We have the Forex reserves and the reserve fund. If needed, the money is there for buying up the assets of leading companies which are not fully valued on the market or are facing internal difficulties. And this process has begun in Russia.

This is a normal practice when the Government at a time of crisis nationalises certain strategic assets held by private parties. The Government assists them in waiting it out while market conditions improve, and then turn over these assets to new and more effective owners.

There is nothing to be feared in this. But it is critical to explain this to the public and to investors, in order to calm anxieties.

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