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February 16, 2019 www.intellinews.com I Page 2
Sentiment on emerging markets and Russia turning as EM funds have second biggest inflows ever
The stock trading company EPFR Global released its fund flows data through the week ending Feb- ruary 12 that reports Russian assets saw circa $370mn of net inflows from combined equity and bond fund flows in the week, compared to circa $240mn in the previous one, BCS reports.
While Russian bonds were an investors’ favourite in 2017 and for half of 2018 as well, until the US Treasury Department (USTD) slapped sanctions on Russian aluminium producer Rusal and Con- gress threatened to target bonds with “crushing” sanctions this year. However, after these sanc- tions failed to appear at the end of last year and Russia just put in record current account and
federal budget surpluses for 2018, the interest in Russian bonds is perking up again.
The USTD decided to drop the sanctions on Rusal completely in December 2018, which has improved sentiment further. And confidence just got another boost: Moody’s returned Russia to “investment grade” in February, completing the hat trick of investment grade ratings from the leading ratings companies.
Russia’s equity market has been range bound with the dollar denominated Russia Trading Sys- tem (RTS) oscillating around the 1,000 mark since Russia annexed the Crimea in 2014, although the market did re-rate in 2016, returning 50% y/y, after investors became convinced the sanctions regime would not get much worse. While there have been some stellar returns to be made at the corporate level as the crisis caused a consolida- tion in many sectors, the overall market has re- mained the purview of the brave and inflows have been depressed from boom-year levels.
That said, Russia-dedicated funds managed to attract circa $30mn in the last week, the largest