Deutsche Boerse analysts: For Russian companies, it's not really business as usual

By Andrei Skvarsky.

A survey by Deutsche Boerse-owned data provider MNI suggests that the majority of Russian companies are increasingly unhappy with the state of their business because of western sanctions against Russia, and that the overall sentiment became predominantly pessimistic in May.

The mood of the country’s business community hit its lowest level last month May since last December and plunged by 11.2% since May 2013, MNI, a company with multiple offices across the world, said in reporting the findings of the latest of monthly surveys by its London-based research division MNI Indicators.

The polls involve interviews with executives at manufacturing, service, construction and agricultural firms – around 200 altogether – listed on Moscow Exchange.

Upbeat attitudes that built up in the run-up to the Sochi Winter Olympics have been eroding steadily since the US and European Union imposed their sanctions on Russia in March for its annexation of Crimea, according to MNI Indicators.

However, May’s poll was this year’s first MNI Indicators survey to suggest the predominance, albeit marginal, of negative sentiment as a result of what are limited sanctions, though it showed export orders to have recovered somewhat, stock levels to have been contracting at a slower pace than in April, the ruble exchange rate to have benefited business for the first time in three months, and companies to be still optimistic about their future financial status.

“We had already seen some impact on the companies in our panel from the fallout in Ukraine, but this month’s fall into contraction shows it even more clearly,” said Philip Uglow, chief economist of MNI Indicators.

Uglow also poured some cold water on Russia’s much-hyped recent 30-year agreement to supply China with natural gas, a deal valued at more than $400bn and seen by Moscow as an effective antidote to the sanctions.

“Russia’s agreement to supply natural gas to China helps to diversify its trading partners. But while President Putin enjoyed his moment in the spotlight with President Xi of China, the vast majority of Russia’s trade lies with Europe and he’d be wise not to rattle their cage too much more,” Uglow said.

The central bank’s raising its key rate to 7.5% late in April from 7% had not yet had any effect on businesses, as the majority of companies polled reported no change in their interest costs.

The MNI Russia Business Sentiment polls consist of computer-aided telephone interviews and form the basis for the monthly MNI Russia Business Indicator. An indicator above 50 reflects expansion, one below 50 shows contraction and one of 50 means no change.

May’s indicator was 49.2. April’s had been 55.6.

(Visited 27 times, 1 visits today)

Sorry, comments are closed for this post.