04 November 2003 01:46
Market timing THE LEX COLUMN:
Is there ever a good time to buy into an emerging market investment bank?
Deutsche Bank has been negotiating to buy a stake in United Financial Group,
the Russian brokerage, for over a year now. But Deutsche's decision to
press ahead with a 40 per cent UFG shareholding looks a lot braver than it
would have a month ago, before the Yukos storm broke. Market volatility is
always good for equity trading, which Deutsche wants to build up in Russia.
Still, the Russian market's 20 per cent fall in the past fortnight has
been precipitate enough to shake the strongest nerves.
UFG is not Yukos. The price represents the most modest of bets for Deutsche
Bank, whose board can look on the investment with far greater equanimity than
ExxonMobil or ChevronTexaco could muster in considering a stake in Yukos.
If there is a concern about the UFG purchase, it lies more in the prospects
for a Russian market that was, until the Yukos cold shower, looking
distinctly overheated. Last time Western investment banks started buying into
Russian brokerages was 1997-98, when SBC Warburg teamed up with Brunswick and
Flemings bought into UCB Capital, just before the Russian debt default.
Worryingly, Charles Ryan and Boris Fedorov, UFG's founders, are both
partially cashing out by selling this stake to Deutsche. Both, however, still
have money in the business, and Deutsche is also protected by reciprocal put
and call options. Although the timing could have been better, the deal should
be no cause for alarm.
[FTI [The Financial Times]] |
RUSSIA IN FACTS
