Benefits of Local Listing - Looking at Historical Patterns

> Over the past 12 months, four companies with operations in Russia have applied for a secondary listing in Moscow: TCS Group, Etalon Group, Mail.ru Group and Petropavlovsk. A local listing has important implications for all of these names, creating, in our view, some interesting takeaways for stocks that do not yet have a local listing, such as HeadHunter, Globaltrans, Global Ports, Evraz, Highland Gold, IRC and VEON, should they decide to apply for one.> A local listing has a substantial impact on stock liquidity. Liquidity tends to double or triple within a month after companies announce their decision to list locally.> The impact on stock performance is less certain. We have examined stock performance relative to the RTS Index and found that Mail.ru and Etalon outperformed significantly over the month following the announcement, TCS performed in line (though started outperforming after two to three months), while Petropavlovsk was quite volatile as it announced its decision to list in the middle of a shareholder conflict. Overall, these numbers suggest that stocks most likely outperform after obtaining local listing, ceteris paribus.> For Mail.ru and TCS, the local listing has paved the way for MSCI inclusion. However, this has not been the only factor behind outperformance. Etalon outperformed even without standing any chance of entering the headline MSCI index. The outperformance was rather a reflection of the increased role of the local investor base.> That said, historical patterns suggest that the announcement of a local listing by any company not yet traded on the Moscow Exchange should be treated as major positive news.