OREANDA-NEWS. July 17, 2009. Lawmakers introduced a proposal to the draft law on trade approved by government authorities this week, reported the press-centre of OTKRITIE FC.

The proposal prohibits the opening of new stores (or addition of selling space) for retail chains with annual revenue of more than RUR1bn and a market share of 25% in any city, municipal area, Moscow and St Petersburg. This initiative has caused a stir among the largest local retail chains, since it could seriously impact retail expansion. The first reading of the draft law on trade is expected in September 2009.

View: We believe this news will have a slightly negative impact on retailers' stock performance, due to the uncertainty that it stirs up. However, it remains unclear whether this version of the draft law on trade will be gain approval. Should the clause restricting expansion be included in the final version, it will seriously hit retailers going forward, rendering unattractive their expansion in smaller cities. In addition, the expansion of the largest retail chains in St Petersburg and Moscow would come to a halt, which could spell poorer sales growth and slower expansion for the big retailers.

Action: We advise investors to exercise caution when investing in retailer stocks before the final version is approved.