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Latest Victim in ‘Zero Sum’ World Is a Russian Internet Giant

Anisha Sircar

(Bloomberg) -- Yandex NV, often referred to as “Russia’s Google,” has become the latest victim of recent moves by some of the world’s largest economies to engage in rounds of protectionism.

The Russian Internet search company lost 16% of its market value on Friday after the Kremlin endorsed a draft law that would limit foreign ownership in major Russian technology firms. The plunge attracted the attention of at least two Wall Street banks, which rushed to Yandex’s defense, writing that the stock was now an attractive opportunity. Shares of Yandex have added back nearly 2% over the past two sessions in New York trading.

On Monday, Bank of America defended Yandex, saying that the stock’s slide created a “particularly attractive buying opportunity,” as Yandex could work around the foreign capital limit by creating a new class of shares and dissolving shareholders’ stakes.

While the bill seeks to limit foreign capital in “significant information resources” by 20%, Bank of America analyst Cesar Tiron said in a note that Yandex could convert a class B share into an A or C share. And last week, a UBS analyst said the market reaction was “overdone” because the negatives from the proposal “look limited.”

The move from Russia, which could take effect starting Jan. 1, comes amid reports that the Trump administration is weighing the de-listing of some Chinese stocks. That would come as part of a broader protectionist push by the White House to limit U.S. investment portfolio flows into China in its continued trade war with the world’s second-largest economy.

“The economic model that seems to be behind these policies is that of a world economy that works as a zero-sum game: If Russia wins, the U.S. loses and vice-versa,” said Graciela Chichilnisky, a Columbia University economics professor.

A Citigroup analyst said in a report that the Russian internet bill is “certainly a worrying development for Yandex, one that inevitably overshadows operational momentum.”

Chichilnisky said that one of the insights of free-market economics is to show that the world economy is not always a zero-sum game, and that groups of nations can benefit from trade, “not always, but on a number of occasions and in a number of ways.”

The Russian bill and the U.S. trade war “arises from a zero-sum perspective on the world economy -- perhaps even a negative sum game -- where both traders lose,” Chichilnisky said.

To contact the reporter on this story: Anisha Sircar in New York at asircar@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Scott Schnipper, Jeremy R. Cooke

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