Advertisement

Russia: opportunity for the adventurous

Russian stocks are at bargain levels right now. Here are three ways brave investors can buy in.

Is it time to take a fresh look at Russia? asks Jen Wieczner on Fortune.com. The crisis in Ukraine has sent foreign funds running for the exits, pulling an already-depressed market down by around 12% so far this year.

Major companies such as energy giant Gazprom have traded on price/earning (p/e) ratios as low as three in recent weeks, while the overall MSCI Russia was on a p/e of five at the end of March. "Investors who thought Russian stocks looked incredibly cheap before think they're practically irresistible bargains now."

Advertisement - Article continues below

Of course, there's good reason for this apparent cheapness. Political risk is high and the quality of most companies is poor. The Russian economy has been struggling for some time and sanctions by Western governments are set to make matters significantly worse, says Capital Economics.

Further capital outflows are likely to push the ruble down, spurring higher inflation that will eat into incomes and damage consumer spending. The central bank will be forced to keep monetary policy tight at a time when looser policy is needed to boost growth. Confidence will suffer and business investment, which was already weak, will stagnate.

So, there's no doubt Russia remains a risky destination and the outcome of events in Ukraine is entirely unpredictable. However, a crisis is often the best time to buy and at current valuations it still looks a good long-term opportunity for adventurous investors.

Ways to get access include the HSBC MSCI Russia ETF (LSE: HRUB), which invests in larger firms, while the Prosperity Voskhod Fund (AIM: PVF) is an investment trust specialising in small- and mid-cap stocks. Those who prefer open-end funds could consider Neptune Russia & Greater Russia, run by the experienced Robin Geffen.

Advertisement
Advertisement

Recommended

Visit/investments/stockmarkets/600688/bullish-investors-return-to-emerging-markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Visit/519872/beware-the-hidden-risks-when-investing-in-emerging-markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Visit/517395/emerging-markets-buy-when-the-news-is-bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019
Visit/514936/emerging-markets-bounce-back-after-a-miserable-few-months
Features

Emerging markets bounce back after a miserable few months

Investors in emerging markets have been enjoying some long-awaited relief after a miserable few months.
13 Sep 2019

Most Popular

Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/investments/commodities/gold/601587/bullish-gold-price-cup-and-handle-chart-pattern
Gold

This chart pattern could be extraordinarily bullish for gold

The mother of all patterns is developing in the gold charts, says Dominic Frisby. And if everything plays out well, gold could hit a price that invest…
1 Jul 2020