Vladislav Kochetkov, FINAM: 'Food products in the world will rise in price by about two times in the next 10-15 years'
The president of the investment holding told Realnoe Vremya how the decisions of the US Federal Reserve will affect the stock market of Russia in 2022, why it is necessary to issue the single IPO of SIBUR with TAIF right now, and which industries best weathered the pandemic
Another online conference has been held in the editorial office of Realnoe Vremya online newspaper — this time with the president — chairman of the board of FINAM investment holding, Vladislav Kochetkov, on the eve of the working visit to Kazan next week of virtually the entire management of the financial group. The task of the meeting is to resume contacts with clients after a long break caused by the coronavirus pandemic, Kochetkov said. Kochetkov told why a small growth awaits Russia next year, while the stock market — a downfall, and all this is because of the decision of the US Fed. He told us what to expect from TAIF's IPO with SIBUR and why small, not large, businesses have suffered from the pandemic first of all.
How high benefits led to a personnel shortage in the US economy
According to the head of the FINAM holding, countries and industries are experiencing the pandemic period in different ways. The same China with its “shipping crisis” suffered significantly in the end, and despite the growth of the Chinese economy, the consequences of the pandemic have turned out to be significant for China.
“Europe, with its almost 70 percent of the vaccinated population, considers itself more or less immune-protected. European countries are showing low inflation rates and fairly good rates of economic recovery. Probably, the European economy in the near future should be carefully looked at in terms of potential investments," Vladislav Kochetkov believes.
Interestingly, the situation is more complicated for the American economy, but its main problem, the head of FINAM is sure, is not coronavirus at all, but a shortage of supply caused by a shortage of labour. The personnel issue itself arose due to the generosity of the American authorities, who issue relatively high unemployment benefits, not counting additional “Covid-19 payments”. As a result, Americans with these benefits simply do not want to work, which has led to a shortage of personnel, especially in the service sector — there are not the highest incomes comparable to the level of unemployment benefits. Besides, there is also high, even record inflation in the United States, twice as high as planned. This, in turn, may have long-term consequences for the entire global economy— since the US Federal Reserve System will probably start raising interest rates.
Russia's GDP will fall by 3% by the end of the year, and in 2022 the Russian economy will grow, but not by much
Let us remind that in September inflation in the United States accelerated — an increase in consumer prices compared to August was 0,4%. The data was published on Wednesday by the US Department of Labour. In comparison with September 2020, consumer prices increased by 5,4%. Analysts believe that it is caused mainly by rising energy prices. Here it is worth remembering gas prices in Europe, which are breaking new records every now and then.
At the same time, thanks to the same energy crisis, the Russian economy has good prospects, Kochetkov believes — such situation for Russia with its oil and gas economy, on the contrary, brings additional dividends. Even despite the records on morbidity and mortality from coronavirus, the expert is sure.
“In general, the Russian economy is gradually recovering. But in terms of GDP, we will still sink this year, by about 3%, but in 2022, I think the Russian economy will grow, albeit very slightly — only by 4%," said the president of FINAM, noting the final attractiveness of the Russian stock market for international investors due to the cheapness of the market itself and the high dividend yield of Russian securities.
“The main problems due to the pandemic have arisen just for small and medium-sized businesses”
FINAM believes that the pandemic in Russia has been well tolerated by large companies and online businesses, including companies such as Ozon and Yandex. Retail trade would have gone through the pandemic well, too, Kochetkov is sure, if the authorities had not started attempts to regulate prices. Let us remind that the Central Bank and its head Elvira Nabiullina consistently oppose such actions by the government of the Russian Federation and the same Federal Antimonopoly Service (FAS).
The metallurgical industry also has high profitability, as a result, the profitability of securities of metallurgical companies of Russia is high. On the other hand, passenger transportation and businesses that operate in this market have sunk significantly for obvious reasons. Indeed, for example, Aeroflot shares have shown growth this year — but in general, their value has fallen by a third in 5 years. But the revenue of Russian Railways, which had been growing consistently for all these 10 years, decreased in one 2020 from 2,5 to 2,2 billion rubles.
“The main problems due to the pandemic have arisen just for small and medium-sized businesses, including due to lockdowns and the introduction of QR codes, in particular in catering. Big businesses themselves have weathered the coronacrisis quite well," said Kochetkov, who noted that the problems of the same fitness arose additionally due to high rental rates, and the possibility of their former clients to do fitness at home, which appeared during the quarantine period.
Yield in agro-industrial complex around the world does not keep up with the growth of Earth's population
If we talk about Tatarstan, then according to the head of FINAM, companies working in oil production, refining and petrochemistry are doing well: oil prices are currently at local highs, and demand for black gold is high. With such shortage, there are no prerequisites for a decline in oil quotes, Vladislav Kochetkov is sure. But he urged not to forget the agro-industrial complex, products are only getting more expensive now.
“In the next 10-15 years, food products will probably double in price," he predicts. The reason is that the yield in the agro-industrial complex around the world does not keep up with the growth of the Earth's population. This leads to a shortage of products and, accordingly, pushes their prices up. Probably, in Russia, because of the actions of the FAS, it will not be so noticeable," Kochetkov said. “But the products will still rise in price.
It should be noted here that Bloomberg released an analytical material at the beginning of the year, in which it indicates that the increase in food prices in the world will cause the greatest resonance in the largest middle-income countries, whose residents spend most of the consumer basket on food. Among such countries, the agency included Russia, Brazil, Nigeria, Turkey and India. In response, the Ministry of Agriculture of Russia stated that “it sees no reason for a jump in food prices”. But already in April, the Bloomberg Agriculture Spot Index, which tracks key agricultural products, rose to its highest in almost 9 years, which was caused by a sharp rise in futures for this year's harvest — world food prices reached their highest since mid-2014.
Why SIBUR and TAIF should place the IPO of the single company before 2022
“From the point of view of petrochemistry, the industry will grow ahead of schedule. And vertically integrated companies, where there is both oil production and oil refining, will feel even better," believes Vladislav Kochetkov, the head of FINAM. It should be noted that Tatneft, which now has TANECO, has also become one of such companies in recent years.
Russian investors like stocks more than bonds, he noted. Moreover, the current yield on bonds is now low, better than a bank deposit, but not by much. While Gazprom's shares have grown by 120% over the year, Mechel's shares are also actively growing — an annual increase of almost 180%. Tatneft's securities have a growth potential of around 30% by the end of the year, the head of FINAM believes. Over the past year, they have grown by 36%.
“In principle, metallurgical and oil and gas companies in Russia today are interesting for investment, as is the Russian market as a whole, given that it is relatively cheap compared to others. Bank assets are also good, given the growth of the Central Bank rate. Many bank securities are now inexpensive and interesting to buy," Kochetkov notes.
FINAM also commented on the beginning of the merger of SIBUR and TAIF, which started in early October 2021. In fact, as a result, one of the largest players in the industry will appear on the world market, which will allow them to earn more than the two companies previously earned separately. According to Kochetkov, the IPO of the merged company may happen soon, since now there is “a good market situation, a lot of free money and investors who are ready to buy new securities”. The IPO is likely to take place not only in Russia, but will be “double” — in Moscow and New York or in Moscow and London. By the end of the year, it would be more successful for the merged company to be placed on stock markets until the Fed raised rates, the head of FINAM believes.
Fed's rate hike will lead to an outflow of capital from the Russian stock market
“We expect the Fed to abandon its quantitative easing policy next year and raise its rates. Which, again, traditionally, will lead to an outflow of capital from emerging markets, which includes the Russian one. Therefore, the investment strategy in 2022 should be followed carefully," Vladislav Kochetkov said. “The economy will move to growth, which will be about 4%. On the contrary, the stock market may stagnate.”
FINAM also shared with Realnoe Vremya the brands and companies whose shares Russian investors like to trade. If earlier they liked to trade securities of Apple technology company or Boeing aircraft manufacturer, then recently their interest in Asian securities has been growing — through the Hong Kong stock exchange. The activity of the Russian investor is also high on European stock exchanges. Women are more likely to trade mainly the shares of the French fashion house Louis Vuitton, and men — securities of Renault carmaker.
“Cryptocurrencies are for those 'who like it hot'. Indeed, very large clients today invest up to 5-7% of their 'risky' portfolio “for the long”, expecting a significant growth of cryptocurrencies in the next 3-5 years, that is, they bring a good speculative income. Today, you can also buy bitcoin futures," Kochetkov said.
At the same time, the head of FINAM does not recommend novice investors to invest all their savings at once, especially when entering the stock market alone. To begin with, he advised to form a “cash cushion” of three to six salaries in a bank account — since you can both earn and lose on stocks. Secondly, to deal with a good broker who can advise and support his client, since the client's successes are directly beneficial to the broker himself:
“I would strongly advise you to follow the advice of your broker, as it is always a long-term business for him.”