M Stanley eyes Russian growth FINANCIAL SERVICES:
ByLine: By ARKADY OSTROVSKY
Morgan Stanley, the US investment bank, will today announce a large-scale
expansion of its Russian operations despite growing nervousness among
investors about the country's business climate.
Morgan Stanley is planning to invest up to Dollars 50m over the next
two-and-a-half years to build a fully licensed Russian subsidiary that would
enable it to deal in domestic bonds and shares. The bank, which until now has
only performed an advisory role in Russia, is set to create a trading
platform complete with back-office functions for domestic markets.
It is also planning to tap into a growing market for currency and commodity
derivatives.
Rair Simonian, president of Morgan Stanley's Russian operations, said
the bank would apply for full Russian banking and broker/dealer licenses.
"We have made a strategic decision to move into the Russian domestic
market," he said.
The bank would not comment on the exact size of its investment, but it is
understood to be between Dollars 40m and Dollars 50m. It is planning to hire
extra 40 people in sales, trading and back-office operations, in addition to
a current team of 10 investment bankers.
There is growing nervousness about Russia's investment climate as the
authorities intensify their attack on Yukos, the Russian oil company. Over
the past month Yukos has lost 24 per cent of its capitalisation as investors
faced the prospect of the company being forced into bankruptcy.
"The situation surrounding Yukos is of concern to us. But we don't
think it will change the country's long-term perspective and positive
economic fundamentals or mark the beginning of a wide-scale attack on Russian
business," Mr Simonian said.
Bankers say that while portfolio investors are heading for the exit,
strategic investors are pushing ahead with their investment plans.
Morgan Stanley is the latest investment bank to expand its presence to Russia
over the past few year. Last year Deutsche Bank bought a 40 per cent stake in
United Financial Group, a Moscow-based investment bank for an estimated
Dollars 70m. UBS also has a joint venture with Brunswick, a Moscow-based
brokerage.
Merrill Lynch and Goldman Sachs are said to be looking to expand in Russia.
Mr Simonian said the decision was the result of tougher competition and
growing potential of the Russian domestic market. "We are facing a much
tougher competition than we did 10 years ago."
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RUSSIA IN FACTS
