Moscow to lose 17 positions in the Global Financial Centres Index

By Marina Romanova

Tallinn, Riga and Almaty had drown ahead Moscow to emerge as current Eastern Europe and Central Asia top financial centers, according to the latest Global Financial Centres Index (GFCI) rankings released this Monday by London-based consultancy firm Z/Yen and Long Finance.

The former capital city of the Republic of Kazakhstan scored 605 points, for the first time leaping over Moscow, which ranked 84 globally with 568 points. Russia’s second largest city, St Petersburg ranked 85 with 567 points, although losing only 3 points since March 2016.

Former Soviet Baltic nation’s capitals, Tallinn (Estonia) and Riga (Latvia), holding 50th and 52th positions accordingly, both made strong gains and are just ahead of Istanbul and Almaty. The leading center in this region is now Warsaw – 45th place with 633 points.

The GFCI is a semi-annual study conducted by the Z/Yen Group, surveying over 2,500 financial services professionals. The index rates each financial center on a scale of 1,000 points and considers five areas of competitiveness, such as the business environment, development of the financial sector, infrastructure, quality of labor force and regulations, and responses to questionnaires from people working in financial services.

Although, the economic downturn caused by falling oil prices and Western sanctions is not the only reason for Russia to lose 17 positions since March 2016 but political volatility. “Russia is still a very hard place to do business and you always feel you can lose everything on a political whim,” Z/Yen Group report reads.

“Istanbul, Moscow, St Petersburg and Athens continue to languish. Turkey and Russia are both involved in armed conflict. Although geographically removed from the fighting, the financial centers in these countries are clearly affected by the uncertainty this creates”.

However, Moscow is not the only global financial center which fallen in the last 6 months. The leading centers in Europe are London, Zurich, Luxembourg and Frankfurt. London, Geneva, Amsterdam and Stockholm have, although not that radically as Moscow did, yet slightly fallen in the ratings whilst the other centers in the top 50 from the have all risen.

The GFCI noted the new tendency of Asian centers overcoming those traditional financial hubs of Europe and North America. “The average rating of the top five centers in each region shows that the historical dominance of the leading centers in Western Europe and North America have been eroded over time by the leading centers in Asia.”

When GFCI respondents were asked which centers they consider likely to become more significant in the next few years, eight of the top 15 chosen were in the Asia-Pacific region with Shanghai and Qingdao leading the list.

Globally, the top three spots are occupied by London, New York and Singapore. The results, however, do not take into account any fallout from the Brexit decision reached in the June 23 referendum in the UK because the data was collected at the end of June.

“Looking ahead to GFCI 21, assessments given to London in July and August are significantly down from previous levels,” the company said in a statement.

At the same time, last week Russian sovereign Eurobond issue triggered a lot of interest among investors. As a result, despite sanctions, Russia managed to raise US$1.25 billion in Eurobond top-up in a deal more than six times oversubscribed on September 22nd, Reuters reports.

According to the Finance Minister Anton Siluyanov, placement was done in less than 10 hours. “We saw a huge demand from investors… Around 200 investors from the United States, Britain, Europe, Asia and Russia submitted their bids,” he said in a statement.

“Moscow will be eager through this tap to send a message that it can still finance itself in the market – circumventing or eroding the impact of Western sanctions,” Tim Ash, senior credit strategist at Nomura told reporters’.

Siluyanov also said that the additional issue was placed among foreign investors only, of which the United States accounted for 53 percent, Europe – 43 percent and Asia – for 4 percent.

Some observers expect Moscow to reimburse lost points in 21 Global Financial Centres Index next year.