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Putin Likely to Return as Russian President, Vostok Nafta Says

May 18 (Bloomberg) -- Vladimir Putin is likely to return as Russia's president next year and appoint Finance Minister Alexei Kudrin as his prime minister, according to commodity investment fund manager Vostok Nafta.

"The Moscow rumor mill is currently putting money on Putin to be elected back as president," it said today in an investment report. President Dmitry Medvedev may be named chairman of the Constitutional Court, added Vostok, which manages $550 million.

Putin, a 58-year-old former KGB officer, handed over the presidency to his 45-year-old protégé, Medvedev, in 2008, because of a constitutional ban on serving more than two consecutive terms. Putin, now prime minister, hasn't ruled out running for president in 2012.

Medvedev, a lawyer from Putin's hometown of St. Petersburg, said April 12 he's nearing a decision on whether to seek re- election. A day later Putin said it was too early to decide which of them will run.

Julian Rimmer, a trader of Russian shares at CF Global Trading in London, said Russian stocks would rally 10 percent "in short order" if Medvedev continues as president. If Putin returns, equities would be little-changed as this scenario is already priced into the market, Rimmer said by phone.

"Medvedev is perceived as better for Russia due to his liberal reforms while Putin is seen as representing the old guard," Rimmer said. "Russia is still trading at a massive discount due to its corporate governance problems and state interference in economic policy."

Uncertainty About 2012

Russian stocks are the cheapest of the four co-called BRIC nations, with a price-to-earnings ratio of 8.3 compared with 9.7 for Brazil and 16 for China and India, according to data compiled by Bloomberg.

Uncertainty about the 2012 election is holding back investment flows into Russia, said Chris Weafer, chief strategist at UralSib Securities in Moscow.

"It has created something of a counter-balance to the improving fiscal and budget situation," he said today in e- mailed comments.

The week to May 11 saw the first redemptions from Russia- focused funds since mid-March, according to VTB Capital, the investment banking arm of Russia's second-biggest bank by assets.

Weafer said investors see one of two scenarios: either the status quo is maintained or Putin returns.

"In that latter scenario we could easily see Kudrin as prime minister and Medvedev go to the Constitutional Court," he said. "The question mark will hang over market sentiment until the issue is resolved one way or the other."

Article ©2011 BLOOMBERG L.P. ALL RIGHTS RESERVED; article first appeared at http://www.bloomberg.com/news/2011-05-18/putin-likely-to-return-as-russian-president-vostok-nafta-says.html

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