The stars seem to be aligning on a momentum front for Russia.
They have been here before. It ended nastily in 2008 as Putin made the front of Time Magazine as ‘Person of the Year‘. Amazon and Bezos were people/company of the year one time too and came back to all-time highs…
I made an awful attempt to catch a bottom in the markets by trading Russia in October 2008. The vehicle of choice was $RSX. I took a hefty loss when the stock traded down to the low 20’s from my first entry in the 30’s. It’s in the archives here. When it traded below $10 I was just glad to have survived. It’s now $36, DST is making the internet investing look easy and TechCrunch has an event in Moscow…in english.
The bubble theorists are going to have a field day with Russia and they are wrong.
I will go deeper into the subject on ‘Momentum Monday’ tomorrow night but I believe Russia has legs. There are not many choices to invest in Russia and that has to be one of the good things about this trend again.
PS – Let me know some securities/tickers for us regular folks in the comments.
The US-listed universe of Russia-exposure stocks is very modest compared to the many stocks that trade across a multitude of sectors on the LSE, MICEX and RTS exchanges.
In order of prominence it’s OGZPY, LUKOY, MBT, VIP, MTL, WBD and CTCM.
For the last 2 years, the 60-day corellation between SPY and RSX has been max at .92 and min at 0.72, avg. current is 0.84.
The 30-day correlation is currently at 0.91.
So you are better off trading SPY and avoiding the regional risk – you know.
My 2 cents.
Just my 2 cents.
thx.
In modern times, say 2002-2007, Russian equities lived a life of their own and paid little attention to global markets and correlations were lower than the last 2 years.
Fundamentally, much of the equities market is currently leveraged exposure to the oil price as well as other commodities markets. It gets very scary below $40 oil for the economy but the country’s reserve fund has just topped $500 bn and is a very good buffer for when/if such an oil price debacle occurs. Balancing the budget used to require $50 oil but now is closer to $80 as the government machine spends.
Best bets are not actually the oil stocks which dominate the main country indexes and pay a very high proportion of any oil price windfalls over $50 to the government, but the banking, transportation and consumer stocks. More pertinent to the current $90 oil environment which filters down through to the economy is the fact that the Russian consumer pays 13% flat tax, typically does not have a mortgage as his residence (apartment and outer city cottage (dacha)) were given to them almost free in 1990s privatizations and spends like there is no tomorrow (which can seem likely after 3 banking system flops in the last 20 year). Consumer stocks like Magnit and X5 are gowing like crazy and becoming tomorrow’s Walmarts. Ditto for banking giants Sberbank and VTB who are just starting to introduce credit cards en masse for example. Finally, infrastructure and property stocks like Mostotrest and PIK have just caught a bid given the decrepid state of roads etc and of the upcoming Sochi 2014 Winter Olympics and 2018 Soccer World Cup.
Not for the feint of heart (options volatilities peaked at 200% for big-caps in early 2009 taking everyone to the cleaners), but in the land of regular small- and mid-cap 10-baggers, RSX really misses the point.
Country risk and bad press is what makes traders in the region money and sells newspapers. Western press is completely scizophrenic when it comes to reporting about the region and does a u-turn every couple of years.
Like some smart folks around these parts like to say – only price pays.
I hear TNK-BP enjoys all the benefits that Russian rule of law has to offer… I think the ticker is $FML
Will look
CEO of StockTwits.com and founder of Socialleveragellc.com
Sorry… $FML as in F My Life… As in former CEO Bob Dudley having to leave the country after his family received death threats because TNK-BP didn’t pay their “tax” bills…
I should have written the above in Sarcastica font…
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