 Russia has been in the news a bit recently with Putin's adventures in the Crimea. The Rouble has been in free fall (now about 10% below the ten year average versus Sterling for example) and the Russian Index has tanked as troops entered Crimea and on fears of sanctions by the West and oh yes some people think there is a bit of state interference and corruption over there. So you would have to be a Superhero with balls of steel to buy Russian equities at this juncture. However, the research document below suggests that the contrarian idea of buying the cheapest international markets based on CAPE (10 year PE) can work. With Russia being one of the worlds cheapest markets on a P/E of around 5x and trading on a CAPE of around 7 times I believe, then this could be one to buy for the brave as it is certainly out of favour. Who knows perhaps successful diplomatic efforts might avoid another cold war? A good way to play it may be an Investment Trust JPM Russian Securities (JRS) which stand on a discount of around 7% (surprisingly not that wide compared to its history) and last year yielded around 3.6% on its 15.3 pence dividend declared last year and the current 430 pence price. However, they tend to focus on growth so the level of payout may go down as the board have indicated that earnings are likely to be lower this year, although they have moved to taking expenses from capital going forward which should help. The Russian Index apparently yields around 4% versus 2.8% for the MSCI EM Index and as discussed above the CAPE PE is one of the lowest apart from - wait for it - Greece. However, if you prefer an index approach as opposed to an investment trust you could consider the iShares MSCI Russia ADR/GDR UCITS ETF (CSRU) - although it has no yield. So that's probably enough for now on this crazy idea which I'm not enough of a Superhero to implement. Indeed as Winterfloods pointed out in a recent note on JRS: "Although the causes are different the Russian equity market has seen crises before. In the Russian financial crisis of 1997/8 the MSCI Russia fell 92% from peak to trough, in Sterling terms; and in the global financial crisis of 2008/9 it fell by 73% peak to trough. In the five years following the respective nadirs the index increased by 715% and 118% respectively. Over the five years since the nadir in 2009, the fund’s NAV increased by 203%. We remain in the midst of the current crisis and so far the market fall has been modest compared with the previous two crises. It seems that there is some way to go before any resolution to the crisis in Ukraine is reached and the Russian market is therefore likely to remain volatile." I love their English understatement at the end too - Pa-ka (that's Russian for Bye apparently). Don't forget I'm looking for feedback on what you want to see on here so if you have a few minutes for 6 simple questions then please see the link below my picture to the right or click here, thanks. 
0 Comments
Leave a Reply. |
Archives
May 2022
Categories
All
|
||||
RSS Feed
