In separate announcements, the MICEX has announced its plans to go public and list itself on the exchange as well as reporting its earnings for the first nine months of 2012. We had reported recently of the growth in the MICEX’s FX division as it has become the ‘go to’ location for ruble trading and has attracted global interest from traders. In its press release, the MICEX explained that part of its rationale for the IPO was to increase financial transparency and “strengthen Moscow’s position as a financial center and increase the attractiveness of the Russian financial market for Russian and foreign investors.”
In reporting highlights of the exchange, the MICEX stated that it currently lists 694 companies, including the largest Russian firms by market cap as well as having a strong global ranking in cross asset derivative trading. While not breaking down revenues from individual units, the MICEX did single out its FX division and stated “A significant portion of the revenues of the Moscow Stock Exchange are from operations in the foreign exchange market.”
The IPO plans occur after the MICEX issued nine month earnings figures for 2012 of RUB 6.4 billion ($212 million) on revenues of RUB 15.9 billion ($530 million). The figures were 22.4% and 36.7% higher than 2011 results.
We reached out to the MICEX about their plans, specifically in relation to its FX unit but due to the IPO news, the company has entered a quiet period. The MICEX group is the combination of the Moscow Stock Exchange and RTS Exchange which merged in 2011. According to initial announcements, the MICEX group plans to raise $500 million from the IPO.
(On a little of a comical note, I totally dropped the ball on sniffing up this story before the announcement. I had been in communication with the MICEX about an in-depth look at their FX division but had the interview cancelled with this response:
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I am very sorry to inform you that the Moscow Exchange representatives and top managers do not give interviews for the time being. It is a period when the strategy for development is being worked on and the managers do not give any comments. I am very sorry for not being able to assist. We will resume working with mass media and gladly cooperate with Forex Magnates publication in the nearest future.
Ok, so everything about that response screamed either an M&A deal or another important announcement. Talk about not reading between the lines)
While the company has shown strong growth, initial opinion towards the prospects of the stock is mixed with investors worried that the MICEX has elected to only float in Moscow and not in London as well. As such, there is the overriding worry that government intervention may impede the appreciation of the stock price.
Commenting about the effects of an IPO for the MICEX, Igor Suzdaltsev, Deputy CEO at Kalita-Finance stated “Since more than 50% of MICEX shares are owned by Russian Central Bank and state-owned banks, the question To Buy or Not to Buy? is equal to question Do you trust the Russian government or not?”
Also, at Pavel Bykov, Chief Development Officer at Faunus Analytics had this to say “Despite the difficulties in valuating the asset, as well as any other Russian asset, it is certainly a positive step in the right direction. The IPO will make the MICEX more transparent and will attract a significant number of interested investors, not only opportunists. We know, that today MICEX co-owners are well-known funds such as Capital Group and BlackRock. The IPO will continue this process. It is also a very positive signal for traders, working with Russian stocks directly.
Recently we have seen the trend of increasing the attractiveness of not only the specific Russian assets, but the entire market as a whole. This is also supported by a Russian government, which announced plans on building an International Financial Center in Moscow.”