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of Russian state-owned retail banking giant Sberbank for $15.8mn and $3mn, respectively. Templeton’s funds reported on their investment on the website of the US Securities and Exchange Commission at the start of October.
This is definitely just a toe in the water as Sberbank has become a bit of a “tourist stock” for those that want to own something Russian, but don't want a deep commitment. As the country’s leading bank, Sberbank is a convenient way of getting exposure to the entire Russian economy, but with its explicit government guarantee is more safe than houses.
EMs outperform, but Russia is the laggard
Mobius’ return to the Russian market is in keeping with a gen- eral rising interest in emerging markets and a slow rotation out of bonds, which have been handsome performers, into equities.
While the US equity markets continue to set fresh record highs, they are clearly starting to look a bit toppy and managers are looking around for places to park their profits.
The S&P500 index closed up 0.22% on October 1 to set yet another fresh record. European markets were also modestly firmer and the MSCI EM equity index rallied off the 50-day moving average as there has been solid technical support for the index through the course of this year, opined the Institute of International Finance (IIF) in a recent note.
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Tesco reportedly mulls sale of CEE businesses
Levente Szilagyi in Budapest
UK retail giant Tesco PLC is considering selling its Central European subsidiaries if unions stick with their demands for further wage hikes, Hungarian newspaper Magyar Idok reported on October 2, citing an unnamed Tesco manager in London.
The hypermarket chain began a cost-cutting drive that affected both its UK operations and Central European businesses following an accounting scandal in 2014 that involved the alleged overstating of profits.
Tesco closed 13 stores in Hungary after reviewing its portfolio. The UK grocer and general merchandise retailer
One of the big drivers into emerging markets (EM) equities is the improved performance of the Chinese economy. The World Bank raised its real GDP forecast for China this year to 6.7%, from 6.5%, and for 2018 to 6.4% from 6.3%, in line with the consensus view.
The IIF’s capital flow tracker shows that funds are now clearly flowing into EM markets. YTD some $80bn has been invested in global EM markets. The total non-residential portfolio inflows into EM was $14.5bn in September alone – the same as August – although Russia is getting the least of this money. Russia is always the last in the rotation of inflows into EM markets from international funds as it is seen as the most risky of the major BRIC markets.
“Non-resident capital flows to EMs should rise to $1.1 trillion this year, up from $763bn in 2015. This amounts to about 4% of EM GDP – a good recovery from 1.5% of GDP in 2015, but still well below the pre-crisis peak of over 9% in 2007. Almost all components have risen, led by the doubling of portfo-
lio debt inflows to $242bn and “other investment” inflows (largely banking-related) to $293bn – reflecting the search for yield. The exception was a fourth yearly decline in FDI flows, to $467 billion, probably due to the lagged impact of falling commodity prices, protectionism and onshoring – a concern as FDI had been a very stable component of otherwise volatile capital flows to EMs,” the IIF said in a note.
then announced in 2015 that it was placing its businesses in Hungary, Poland, Slovakia and the Czech Republic under the aegis of Tesco Europa to rationalise operations and save costs.
Tesco might now put its regional subsidiaries up for sale in bulk or individually in March 2018, if wage demands are not dropped, Magyar Idok suggested.
Tesco's management reluctantly agreed a double-digit rise in the minimum wage applied to Hungary from this year as it is hard-pressed in keeping costs at bay, but it has been unwilling to concede to further demands from the unions. But given the low unemployment rates across the Visegrad 4 countries of
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