Analysis: Messy Greek Default Could Batter Russia

Page last updated at 07:21 GMT, Sunday, February 19, 2012 - 12:21 EST

The Moscow Times:

An HSBC investment report released Friday made a glowing case for Russian equities, ridiculed concerns about political risk ahead of the March 4 election and said macroeconomic support was flowing Moscow's way.

The bank lauded the imminence of a "cyclical sweet spot." But there was one dark cloud. "A disorderly default in Greece," the HSBC strategists wrote, "could create an interruption to this story."

The European debt crisis is the specter that has stalked the Russian market amid recent stock market gains and resurgent global flows into emerging market funds. Europe is Russia's biggest trading partner and 40 percent of Russia's foreign currency reserves are held in euros.

European Union finance ministers are due to meet Monday to approve a 130 billion euro ($170 billion) bailout package for Greece that would avoid chaos on March 20 when the country has a debt repayment it cannot make.

The rhetoric between Athens, Brussels and Berlin last week failed to exclude the possibility of a messy default. A scheduled meeting of finance ministers on Wednesday was canceled on fears that it could end in failure.

"If the default is planned and well anticipated, then it will actually end up being a boost to the Russian market," said Roland Nash, chief strategist at Verno Capital. "The real risk is that there will be a mistake made, there won't be an agreement and there will be a forced default."

Read the whole story: The Moscow Times