Page 42 - Buy Russia - bne IntelliNews monthly magazine April 2017

42 I Cover story bne April 2017
Buy Russia
Ben Aris in Berlin
Russian stocks are a buy again, after the market gained more than 50% in 2016 and is forecast to return some 15-20% this year.
No one is expecting a repeat of the broad- based rally that made everyone rich in the mid-noughties, but for the well- informed investor there are some gems on offer as the economy starts to recover and Russia’s biggest companies use the crisis to increase their market shares. Eco- nomic growth may be lackadaisical, but analysts are highlighting the earnings at some of Russia’s corporate heavyweights, which have been soaring.
Russia’s market re-rated last year as it became increasingly clear that the nine- year-long gloom since the global financial crisis was slowly lifting, and political tensions were also being dialled down. The dollar-denominated Russia Trading System (RTS) returned more than 50% in 2016 and the ruble-denominated Moscow Interbank Currency Exchange (MICEX) put in a 24% gain to reach new all-time highs.
There was a “Trump-bump” in the last months of the year as speculators bet on rumours that the new US president might repeal sanctions quickly. As those hopes faded both indices fell by about 10% as of the end of March in the year to date, but the increasingly bullish analysts say all that means is there is buying opportunity now for those that missed out on last year’s rally.
The Aton brokerage believes there is between 15-20% upside still left in Rus- sian stocks over this year, depending on how the Trump-Putin relationship develops. The two men will meet in person for the first time only at the G20 summit in July.
Last year’s rally was driven by a reas- sessment of Russia’s political risk, but this year stock prices will be driven by more traditional drivers such as divi- dend payments and earnings reports. Outsized earnings gains amongst the market leaders is one of the few themes that has emerged in the last year.
“Nothing really stands out,” says Mattias Westman, the founder of Prosperity Capi- tal Management, one of the leading spe-
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