INTERVIEW – Emerging market money will bypass London – RenCap


Reuters | Sat Jun 26, 2010 | 4:50am IST

Russian, Indian and Chinese companies snap up African natural resource assets. Kazakh and African companies seek capital in Asia. Middle Eastern money eyes opportunities in Russia. The way Russia’s top investment bank sees the world, Europe and North America are fading into the background as emerging markets increasingly invest in each other and bypass the traditional centres of banking in London and New York. "The big theme is the huge movement of capital towards these regions and away from the West," Renaissance Capital CEO Stephen Jennings told Reuters in an interview. "We see an enormous amount of M&A happening now between and within those (emerging) countries. On the financial side, we very much believe the capital markets are going to move into the emerging markets and away from London in particular."

Jennings points out that Hong Kong last year had more IPOs than London or New York and rattles off a string of deals that RenCap has done across Africa and the former Soviet Union. The $955 million sale last year of Congolese copper miner CAMEC to Kazakhstan’s ENRC, Rwanda’s first-ever IPO, a Brazilian iron ore sector transaction in Guinea and Russian aluminium giant RUSAL’s IPO in Hong Kong are among recent RenCap deals. Jennings sees Africa as the hottest investment destination now for companies looking to build natural resource assets quickly. He says Renaissance has multiple mandates from Indian and Russian investors who want more exposure there. "Three-quarters of the meetings I’m having with oligarchs and state companies have an African element," he said. "In terms of being able to get big resources very quickly, African is in a class of its own at the moment."

Speaking from the bank’s headquarters on the 48th floor of a sleek, newly built tower in Moscow’s emerging financial district, Jennings was critical of higher taxation and tighter regulation in London, saying this will only accelerate the City’s inevitable demise as a financial centre. "At the end of the day, the majority of savings and  

the majority of investment opportunities will be in Asia," he said. "Now the end of the day may be about 10 years away but each week we get a bit closer to that point." RenCap now plans to move out from its established franchise in the former Soviet Union and in Africa into Turkey and Egypt. In addition to organic growth in the ex-Soviet Union and Africa, RenCap has bought South African broker BJM Securities, allied with India’s Kotek for cross-border M&A, and joined forces with Macquarie Securities Korea to pursue Korea-CIS M&A.

RenCap’s structure, with hubs in Moscow and Johannesburg, and offices in the ex-Soviet Union and Africa, reflects a desire to profit as emerging markets invest in each other. "The same team that is working with a Russian state oil company on a rouble bond here … is advising them on their expansion strategy in Africa," he said. "The same team doing RUSAL’s Hong Kong IPO is talking to the Africans about their first Hong Kong IPOs and that’s a very powerful thing." A long-term bull on Russia, Jennings believes that investors are undervaluing the country’s growth potential at this stage of the cycle and should remember its positive track record. "From 1999 to 2007, GDP went from $200 billion to $1.7 trillion, so in dollar terms it was the fastest-growing of the BRICs," he said. "If you’d lined up 100 forecasters in 2000, maybe one would’ve been as optimistic as the actual outcome."

Jennings believes that pundits pay too much attention to Russia’s politics ("who sits in what seat and whether they smiled or frowned – I think it’s a bit irrelevant") and thinks the country’s government will change little in the near term. "We have a set of arrangements, to put it politely, that are very stable," he says. "They are entrenched and they are convenient for a lot of players including, whether the West likes it or not, the majority of Russians." Russia, he says, will see some more gradual privatisation and a big redistribution of assets as owners who survived the crisis and saw the value of their assets recover decide it is time to sell out to acquisitive, cash-rich rivals. Many Russian players are ready to go to market with IPOs and $5-10 billion of issuance could come in the third quarter if market conditions improve, Jennings says. Despite its rapid expansion, RenCap is not hungry for cash. Jennings, who along with his original partners owns 50 percent plus one share of the firm, says the bank is if anything over-capitalised. He says he is "very very happy" with its other big stakeholder, Russian oligarch Mikhail Prokhorov, who bought a 50 percent stake for $500 million in the depths of the crisis.

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5 comments

  1. navanavonmilita

    I am Glad that you are glad.

    Water under the bridge. Please read my intro to my blog. It says clearly that this is an illusion, “maayaa.” Adi Sankara is my Guru, “sadguru,” the true Guru. He said that about “brahman,” the creator, “prakR^ti,” female part and “purusha,” the male part of creation. They got together, for the fun of it and created “sR^shti,” all that can be and cannot be fathomed by human beings. Such as the entire universe of matter, antimatter, quarks and quacks like you and your’s truly. Just having good time in celestial heavens, God only knows where that would be.

    My own take about the Big Bang theory is that some unidentified and also unidentifiable forces collied. It can be further explained by the expansion of our universe. It expands and when, like a balloon filled with air, bursts into pieces, sort of contracts. It is what our sages considered as “brahma’s” breathing. The expansion has a name, a technical nomenclature, “Entropy,” The opposite of it is “Distropy.” It can be explained, further by Thermodynamic Law II. Max Planck, the famous scientist, invented that. He was puzzled by Einstein’s universal Law: e= mcsquared.
    Well, I am getting nowhere with my argument. Enough is said about physics and philosophy, origins of universe and heavens.

    …and I am Sid Harth

  2. navanavonmilita

    My dear V Sekhar,

    Never disclose you true feelings. Your comment has branded you as a Commie. If not a Commie loving fellow traveller. I am truly saddened by my words. They are simply bunch of words. You did not bother to read in between lines. The message was not directed to you. Neither was it directed to honorable Jennings, may his tribe increase.

    The message was addressed to all those idiots who take what is printed, in this case, posted on the internet. “Caveat Emptor,” Let Buyer Beware.” I consider honorable Jennigs as a huckster of self serving information. He is not the first, nor would he be the last.

    I have commented, rather severely on other fake Gurus. Including but not limited to, in such respected newspapers as The Wall Street Journal, The Washington Post, The Globe of Boston, The Guardian of London, The New York Times, Forbes, Deccan Chronicle of Bangalore, Marathi newspapers such as, Loksatta, Lokmat, Los Angeles Tines, Chicago Tribune, and many more who accepted my posts, either without editing or with severe editing.

    You can curb the sarcastic comments of mine by deleting them. I would, rather, you not do it. The simple reason is that you chose to offer honorable Jennings’ propaganda. That means you became a target as much as honorable Jennings. Guil by association. Accessory to the crime, after the fact.

    Why don’t you e-mail this discussion, either to Reuter or to honorable Jennings. let them enjoy this and abstain from such obviously planted stories in future for their own good.

    You my friend, came in crossfire. Not intended, on my part.

    http://navanavonmilita.wordpress.com/

    …and I am Sid Harth

    • V SEKHAR

      Hi Sid Harth,

      Thank you for quick reply.

      I want to clarify that I do not think your comment is directed to me. If I bother with your comment I would have edited it without replying. I intended to keep it as it is in order to make our conversation develop further. I’m glad to read that you have been saddened (truly). With that, topic of ‘bunch of words’ is closed unless you say more about it.

      Bolshevik Party became the great one not because only it is commie, but it proved for the first time how people’s power could be established. My love towards people may reflect as love on those who gratify the people. Maybe one cannot always hide behind a veil. I think I’m not bothered about disclosing. From my point of view it’s not disclosing or hiding. It’s just testing my views by giving them exposure to an open arena where people like you can polish. Polished views may further brighten my mind. That’s what my blogging is meant for.

      By pointing out your ‘bunch of words’ I came to know more about you. Isn’t it guruji? Anyway. I want to confirm that I did bother to read in between lines also. Actually I didn’t offer particularly the propaganda of Jennings. I collected a view on a particular issue. It may be accepted or denied. My collection may not be taken as my acceptance. As you noted in your comment on my ‘about blog’ it’s already there. OK. Thanks again.

  3. navanavonmilita

    Bah, Humbug! Sid Harth

    Russian economy is in the hands few hoodlums and Russian mafia. This idiot, Stephen Jennings, CEO Renaissance Capital, is no good, mirror and smoke screen voodoo medicine man. I wonder if honorable Jennings can find his capitalistic ass with his own two hands without the help of Reuters. I suggest to honorable Jennings to go suck a lemon, perhaps, better yet, go suck up his mamma’s tits.

    http://navanavonmilita.wordpress.com/

    …and I am Sid Harth

    • V SEKHAR

      Hi Sid Harth!
      Are you really Sid Harth? I got this doubt after reading this comment. I remind myself about you as placing powerful, thought provoking and historically sensitive comments as well as posts on my blog and your blog respectively.

      No doubt the Russian economy is in the hands of few hoodlums and mafia. But it’s still a nation and an economy where people live. For now it may be a place as you told but people may change their country once again as per their wishes, as once happened under the leadership of V I Lenin and the great Bolshevik Party. It was the country which heroically checked the advance of Nazi Germany in WW II. We can reject the forecast of Jennings but we can not underestimate a nation.

      What disappointed me is your choice of words to reject a thought. I think well knowledged people like you can’t do this. In general, as far as I know, western people that too American people choose such words irrespective of the subject in question. I wonder if you are an Americanized Indian?

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