#11
Russian debt seen safe from Argentina woes
By Artyom Danielyan
MOSCOW, Nov 8 (Reuters) - Russian foreign debt is unlikely to suffer as a result of Argentina's huge debt overhaul, and might even benefit as it removes uncertainty which had been hanging over the market, analysts said on Thursday.
Argentina offered on Monday to swap $60 billion in locally-owned bonds, almost half its $132 public debt, as part of a massive debt overhaul. The local debt swap is to be followed by a similiar foreign debt exchange so the country can avoid a looming default.
"We can at last say that the problem which has been pressuring the market with its uncertainty...has been solved and now a rally has started," said Yekaterina Malofeyeva, a research vice president at Renaissance Capital.
"Investors understand that the situation in Argentina is different from the situation in Russia. The economic situation in Russia is globally better and factors which influence our debt are different, too."
Russia had to restructure $40 billion of local debt in the aftermath of a 1998 rouble devaluation -- a swap which earned condemnation from investors and barred Moscow from financial markets for several years.
But high prices for Russia's main exports and economic reforms helped the country post a post-Soviet record for gross domestic product growth last year of more than eight percent. GDP is expected to increase more than five percent in 2001.
"I do not think we should worry about Argentina. There are no direct or obvious connections between Russia and Argentina. Russia's economic situation is normal," said UBS Warburg co-director Denis Rodionov.
The Russia 2030 Eurobond has risen strongly since the start of the year, when it stood at 37.30. It was trading at 50.50 in late trade on Tuesday, an all-time high. The 2010 bond has also performed well, standing at 81.50 after starting 2001 at 62.38.
RUSSIA DEBT EYES NEW FLOW OF FUNDS
Alfa-Bank analyst Yekaterina Leonova said the swap would lead to an outflow of funds from Argentina due to a re-evaluation of risks. Some of the money could be channelled into Russian Eurobonds.
"This will spur the growth which started after the situation with the (Argentina) swap became clearer," she said.
Malofeyeva agreed: "Many investors were positive on Russia and many have increased the portion of Russia in their portfolios to the limit," she said.
"But, maybe, in the wake of recent events in Argentina, funds will review their limits and because of this Russia is in a very favourable position."
But Rodionov said Russia was still playing too small a role in large investment banks' activities.
"It is unlikely that the default will have any impact on the shift of funds," he said.
"Some people think Russia is now one of the safest investments. There were tangible volumes (of new funds invested), but not very big."
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