Bear's Kozintseva 'neutral' on Russia

By Vivianne Rodrigues

NEW YORK (Reuters) - Even with the recent sell-off, stocks in Russia remain overpriced and in the short-term may not offer returns high enough to compensate for political risks, Marianna Kozintseva, emerging market equity strategist at Bear Stearns said on Monday.

Kozintseva told the Reuters Investment Outlook Summit in New York that the upside potential in Russian stocks between now and the end of the year is limited.

"Russian economic fundamentals remain very solid, but I don't see any particular positive catalyst in the near term that could take that market really higher," she said, adding this would be the case as least as long as global risk aversion persists.

"Last year these markets performed really well," she said. "They may have ran ahead of themselves."

Still, Kozintseva said investors should look for bargains in sectors such as energy, banking, transportation and transportation infrastructure and aviation.

"Energy is Russia's main asset," she said. "And it will continue to play a key role in Russia's economy - we still like the sector."

A higher degree of state participation in the Russian economy - through the implementation of protectionist barriers and investment in struggling industries - may also end up being "beneficial" for investors, Kozintseva said.

"A higher participation by the state in the economy should not be viewed as totally negative," she said. "It's not ideal, but in the case of a country like Russia, the state may be the only entity in position to act as a 'White Knight Investor' and prevent that many companies disappear or that growth is not limited only to energy and at the big centers."

Kozintseva said she expects mergers and acquisitions in the country to increase in coming years as President Vladimir Putin's administration favors that form of foreign direct investment.

"There's growing interest, especially in other Eastern European countries, to buy companies in Russia," she said.

In a latest move to increase investment in Russia, the state oil firm Rosneft announced on Monday plans for an initial public offering that could raise about $10 billion, one of the world's biggest ever.

"Russian IPOs tend not to perform very well in the first couple of months right after their launching," Kozintseva said. "The success of this IPO will be more dependent on the pricing of the stock than on investors' concerns about Russian politics or corporate governance."