Persistent Corporate Governance Concerns in Russia

The FT has an interesting Q&A today with Peter Elam Håkansson, chairman of East Capital, a well performing Russia fund:

Is there anything beyond the oil and gas story in Russia (which might come off sharply if a real global slowdown takes place)? Secondly, will persistent corporate governance concerns and political uncertainty mean a stock market rerating is unlikely? Vikram Aggarwal PEH: The primary driver of the Russian economy is actually domestic demand, which benefits more domestic oriented sectors like retail, consumer goods, transportation, real estate and telecom. East Capital has been and continues to be overweight on these sectors. Moreover, the IPO wave is dominated by non-energy firms. Economic diversification remains an important challenge and important efforts are being implemented but the incentives are arguably not the strongest with commodity prices at historically very high levels. Corporate governance is improving in Russia, not least due to the fact that many Russian large caps are listing themselves abroad, and the perceived political uncertainty has been reduced after the election.