Back Russia - the most hated stocks in the world
Russia is among the cheapest markets around. These funds offer investors one way to profit.
Russia has been one of the main casualties of the emerging-market sell-off. The rouble has hit a record low against the euro and a five-year trough against the dollar. Russia's MICEX stock index is close to a six-month low.
The economy looks "condemned to stagnation", says The Economist. It has been coasting for ten years on the energy boom. Now that oil and gas prices are no longer surging, GDP growth is likely to fall back to 2% this year.
A "bloated and inefficient state", rampant corruption, shaky property rights, high labour costs and a lack of investment are major obstacles to growth, especially now that consumption is ebbing. A decade ago the budget balanced with oil at $20 a barrel; today it needs to be around $103.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Yet the pessimism looks overdone. As The Wall Street Journal's Richard Barley points out, Russia "doesn't match the profile" ofmost of the countries "in the market cross-hairs".
Its foreign-exchange reserves are healthy, its public debt is very low, it ran a current-account surplus of 1.5% in 2013 and a budget deficit (the annual government overspend) of just 0.5%. There is no immediate crisis. So Russia at least has time to make some necessary reforms.
Russia is "one of the most hated stock markets" in the world, says markets guru Jim Rogers. Its cyclically-adjusted p/e ratio is just under seven, the second-lowest in the world behind Greece. So the bad news is already in the price and the potential upside considerable.
One way in is via the iShares MSCI Russia Capped ETF (NYSE: ERUS). The JPMorgan Russia Securities Investment Trust (LSE: JRS) and the Blackrock Emerging Europe Trust (LSE: BEEP) are also worth researching.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
How to invest in nuclear power
We need nuclear power to go green, says Dominic Frisby. But there is a better option than huge power stations
By Dominic Frisby Published
-
Chase slashes its easy-access savings rate – is it time to switch?
The Chase easy-access savings account has proved popular with savers thanks to its competitive rate and bonus deals. But, as the rate has dropped, has it lost its charm?
By Katie Williams Published