Page 17 - RusRPTFeb19

2.3 What was the most profitable asset class in 2018?
Russian daily calculated which investments paid out the most in 2018
and the winner was the stocks and bonds of Russian conglomerate AFK Sistema that returned 128% and 55% respectively, Vedomosti reported on January 8.
The reason for the outsized returns was the end of a corporate fight between the company and Russia’s state-owned oil major Rosneft, which took over Sistema’s regional oil company Bashneft.
Rosneft CEO Igor Sechin claimed that Sistema has drained Bashneft, a one time investor’s darling, of cash and effectively asked Sistema to come up with all the money that Rosneft paid for the asset during a renationalisation. The case ended up in court, which froze all Sistema’s assets in lieu of damages. The war between the two companies, which was very damaging for Russia’s investment image, came to an end in December 2017 when Sistema agreed to pay $1.7bn in damages to Rosneft and Sistema’s securities spent 2018 recovering from crisis-induced lows.
Ruble
The ruble proved to be another good bet for the exchange rate savvy population. The domestic currency swung widely over the year on the back of several rounds of sanction threats and the see sawing of the oil price. But Russians have long since learned to hedge their bets by using foreign exchange deposit accounts and also very sensitive to the interest rates paid on these accounts with domestic banks, that also went through some sizeable fluctuations.
As the US Federal Reserve bank started on its tightening cycle the dollar appreciated strongly over the ruble in 2018, up by 20% on the year, while the euro was up 14% and the Japanese yen by 22%.
Converting rubles to dollars and putting them on deposit earns extra income from the interest rates paid that started 2018 at 8.55% at the biggest Russian banks on ruble accounts, 2.5% on dollars and 1.2% in euros. As a result dollar deposits returned Russian investors 23% on the year in ruble terms while the euro returned 15.4% -- something that will not be lost on most of the Russian population.
17 RUSSIA Country Report February 2019 www.intellinews.com