Citigroup Sees Prolonged Discount for Russian Political Risk

Citigroup Inc. said the market is factoring in a risk premium of about 200 basis points for Russia’s domestic political risk and the discount will be priced in “for the foreseeable future.”

“The political risk premium should stay,” Citigroup analysts led by Kingsmill Bond and Andrey Kuznetsov said in an e-mailed research note today. “There are tail risks such as larger protests, conflict within the elite, or attacks on individuals.”

The presidential election next month may foment more demonstrations and unrest, according to Citigroup.

“Now that the middle class has been politicized, there are many issues which could spark further protest,” the analysts wrote. “We stick with our longstanding call to buy asset plays over oligarch plays while the political uncertainty lasts.”

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