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. Last Updated: 07/27/2016

Investors Hope Putin Will Offer Assurances

Investors hope President Vladimir Putin will pledge a smooth transition of power, detail how the country's vast oil revenues will be spent and promise more roads when he makes what might be his last state-of-the-nation address on Thursday.

Putin will deliver the address to both chambers of the parliament, Cabinet members and other dignitaries in the Kremlin at noon. The speech, which usually lasts about an hour, will be broadcast live on state television channels Rossia and Channel One.

The Kremlin never releases any details of the address in advance. But a Kremlin spokesman said Putin would start with a moment of silence in honor of former President Boris Yeltsin, who died of heart failure Monday and was buried Wednesday.

After seven years of economic stability, investors said Wednesday that they were particularly eager to hear assurances of a smooth transition of power as the country elects a new president next March.

"Basically, I believe he will confirm he will ... step down and ... is going to say that there will be no upheavals in relation to the election," said Peter Westin, chief economist at MDM Bank.

Investors will also be listening for clues about who might replace Putin.

"I think people will pay particularly close attention to the areas which he praises. If he says praise for, say, railways ... I think investors might perceive this as a hint of some support for Yakunin," said Erik DePoy, strategist at Alfa Bank.

Vladimir Yakunin is president of Russian Railways and believed to be a presidential contender. Other top candidates are thought to include First Deputy Prime Ministers Sergei Ivanov and Dmitry Medvedev.

Putin could dedicate some time to summing up the results of not only this past year but also the past several years because this might be his final address, DePoy said. Prompted by Yeltsin's death, he might even go as far back as the Soviet collapse and draw attention to the solid progress that the country has made since then, he said.

Economic growth is close to Putin's heart, and he has reminded the country nearly every year of his goal to double gross domestic product in a decade -- a goal that still seems just out of reach. Last year, Putin spent a good part of his speech worrying about the national demographic crisis and urging families to have more babies.

Investors on Thursday also will look for statements confirming that the government's sound fiscal policy will continue throughout the year and beyond, market watchers said. The government has kept a firm grip on a windfall of oil revenues by locking them up in a stabilization fund. Investors want assurances that the government has a clear strategy on how to use the money from the stabilization fund and would like to hear specific initiatives.

"What will you invest in? Will it be foreign bonds, foreign equities or will it be like a Chinese plan to invest in commodities?" DePoy said. "It's not enough to just say in general: 'We will invest wisely in foreign markets.'"

Putin would do well to announce a sharp increase in government spending on infrastructure, such as roads, bridges and utility services, said Ovanes Oganisian, a strategist at Renaissance Capital.

It would be good news for the market to hear about a reduction in the value added tax or its replacement by a sales tax, he added.

Sergei Markov, a Kremlin-connected analyst, predicted that Putin would talk about the need for large companies to upgrade their technology and would call for greater social justice amid a widening gap between the rich and the poor.

Putin could make several critical remarks about state television, Markov said, without elaborating.

Another Kremlin spokesman, Dmitry Peskov, declined to comment on the contents of Putin's speech. He earlier said senior aides had decided not to attend this week's Russian Economic Forum in London in order to draft the speech.

Peskov, however, noted on Wednesday that Putin could address the nation one more time because he would hand over office to his successor only in May. "If you look, Putin will still be the president next April," Peskov said. "I would not positively call this the last address. Theoretically, there is a chance" for another one.

Putin will decide about next year's address later on, Peskov said.

Markov said next year's address could take place right before or right after the March election. DePoy suggested that Putin and the incoming president could make a joint address.