Earlier this week, Russia’s central bank sold a 7.6% stake in the country’s largest lender, Sberbank. The offer—twice oversubscribed—priced at Rb93 per share (US$3.04), raising around US$5.2bn for the state. This represents a significant chunk of the US$50bn in proceeds that Russia expects to raise through an oft-revised, long-delayed privatisation programme.

The Sberbank sale is also an invitation to revisit bank valuations. The Russian banking giant, with around US$380bn in assets, trades at around 1.5 times book value. It controls nearly half of Russia’s retail deposits and benefits from the backing of the oil-rich state, which retains a controlling stake (50% plus one share) in the lender. Sberbank set its sights abroad earlier this year, with the purchase of assets in Eastern Europe and Turkey from their struggling West European parents. Speaking of which, the US$5.2bn that it cost investors for around 8% of Sberbank would fetch a significantly larger stake in many Western banks.

The interactive chart below plots US$5.2bn as a percentage of large banks’ listed shares on the vertical axis, and for context includes lenders’ total assets along the horizontal axis. Belgium’s KBC is similar in size to Sberbank in terms of assets, but a US$5.2bn investment would buy majority control of the Brussels-based bank. The lowly valuations of French banks are also noteworthy when viewed this way; Credit Agricole is six times larger than Sberbank in terms of assets, but for every 1% of the Russian bank’s shares an investor could pick up nearly 4% of the French bank’s equity.

Chart data sourced from Bloomberg

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Starting next week, India will allow foreign investors to invest directly in listed companies. Previously, foreigners could gain equity exposure only via mutual funds or other intermediaries.

But just because foreign investors are allowed to invest doesn’t mean that they will. India’s benchmark Sensex index shed 25% last year, while the rupee sank by 17% against the dollar. Over the course of 2011, foreign institutional investors withdrew a net US$358m from Indian equities.

In 2009 and 2010, much better years for Indian shares, net foreign inflows approached US$50bn. By widening the base of investors, India’s policymakers hope to usher in another era of robust foreign inflows. Recent reversals of reforms to foreign ownership limits in the retail and financial industries, however, raise thorny questions about India’s business environment. In this context, political opposition to the liberalisation of India’s stockmarkets is another cause for concern. Despite India’s undeniable growth potential, clear signs of a turnaround in Indian equity performance—and proof of the government’s sincerity in granting greater access to shares—are required before foreign investors will feel comfortable piling back into the country’s markets.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Today, Standard & Poor’s announced a new equity index based on the CIVETS countries. The moniker, coined by the Economist Intelligence Unit a few years ago, describes a group of sizeable emerging markets—Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa—with appealing conditions for sustained high growth. Although not yet part of common parlance like the BRICs (Brazil, Russia, India and China), the CIVETS are generally the most-discussed markets in the next tier of emerging economies.

For its part, S&P describes the group as characterised by “dynamic, rapidly changing economies and young, growing populations.” Back-testing its new index, the CIVETS-based construction has recently outperformed indexes based on the BRICs as well as emerging markets in general. But this is not to say that shares in the CIVETS countries are uniformly buoyant: since the start of 2008, Colombian large caps have risen by more than 60% while large Egyptian stocks have shed more than 50% of their value. The group is an eclectic mix of political and economic systems, with financial markets of widely varying maturities. Thus, an index built from the CIVETS offers exposure to a targeted yet diversified basket of important emerging economies.

The recent performance of CIVETS shares will attract adventurous investors seeking outsized returns, much like intrepid coffee lovers who covet a rare, expensive type of bean harvested with the help of the civet, a cat-like mammal. In a less auspicious omen, civets were also linked to the spread of the deadly SARS virus.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

The shares of Athens-listed banks leapt by more than 8% today following a flurry of good news. Greece’s ten-year sovereign bond spread dropped below 800 basis points over German bunds. Equity strategists upgraded their opinion of the country’s shares. Finally, and perhaps most importantly from a psychological standpoint, Piraeus Bank managed to raise just over €800m in a rights issue.

These are all encouraging developments, but conditions for Greek lenders remain dire. The ten-year government bond yield, at around 11%, remains unsustainable. The equity upgrade, by Credit Suisse, was merely from “underweight” to “benchmark”, hardly a ringing endorsement. And despite Piraeus Bank’s capital-raising success and today’s surge in banks’ shares, the lenders still trade at deep discounts to book value; markets rate Piraeus Bank’s assets at only 35 cents on the euro.

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.

Few stock exchanges can claim to have had as eventful a 2011 as the Dhaka bourse. Following riots after a steep daily drop last month, the market has been no less fiery so far this year, with authorities suspending trading on Monday after a morning plunge of more than 9% in less than a hour saw investors (again) take to the streets. Just as dramatic, the exchange’s main index soared by more than 15% yesterday (and added another 2% today for good measure).

Following the demonstrations earlier this week, officials relaxed recently imposed rules on banks’ exposure to the stockmarket, a key driver behind Monday’s fall. But this risks re-inflating a dangerous-looking bubble; although down by 7% so far this year, the market gained more than 80% in 2010. Investors’ wild mood swings are unlikely to be tamed by the rather quaint advice issued by the bourse at the start of trading each day:

“Good morning hon’ble Investors; make your investment decision based on company fundamentals, technical analysis, price level, disclosed information; and avoid rumor based speculations.”

The EIU's Financial Services Briefing delivers a complete picture of the finance industry in markets around the world, combined with five-year forecasts of key sub-sectors.