Economics & Strategy – Equity Strategy: Second

Although he dips from first place to second, Alexey Zabotkin continues to impress investors with his ability to “connect the top-down picture with the bottom-up opinions of sector analysts,” as one buy-side backer puts it. The VTB Capital strategist’s outlook is mixed. “Anticipating the central bank to deliver tangible monetary policy easing in the second half, we see more supportive momentum for the stock market starting from midsummer,” he says. “Metals entered 2013 at a very low base, and the first quarter was unspectacular. The stocks are at multiyear lows, so it is easy to surprise on the upside from such a low base if economic momentum indeed looks brighter.” He is less optimistic about financial services providers and utilities. “For banks 2013 will be more difficult than the market perceives. The impact of the economic slowdown cannot be written off, and yet we have not seen any tangible earnings downgrades,” Zabotkin notes. In the utilities sector “the state-controlled large-cap names have been insatiable consumers of capital expenditures, and policy is unlikely to become more generous, as the government is determined to put a lid on regulated tariffs for the time being,” he explains. “Value can be unlocked only with a radical change in the way the businesses are run, with greater responsibility over costs. For now the sector at large is mostly uninvestable.” — Thomas W. Johnson