Is it time to buy commodity exporters? Goldman Sachs thinks that the Russian and South African equity indices could be poised to outperform their emerging-market peers, says Sydney Maki on Bloomberg.
Both markets are skewed towards miners and other raw materials firms, which should gain from strong global commodity prices. The bank also notes that rising real yields in the US are reducing the relative appeal of alternatives such as Chinese growth stocks.
Mebane Faber of Cambria Investment Management says South African stocks began 2021 on a cyclically adjusted price/earnings (Cape) ratio of 16.5. That is a reasonable price, but still more expensive than the FTSE (on a Cape of 14). Russia, on a Cape of just 7.3, is in a different value category entirely. There are good reasons for the steep Russian discount, says Henry Foy in the Financial Times. Weak property rights and rule of law mean an investment in the country is never truly safe. Corporate transparency is another problem. Take Siberian energy business Surgutneftegas, which has scarcely any debt and a $50bn cash pile but is valued at just $20.5bn. Investors have given up trying to guess what the cash is for and don’t expect any answers: “There is no public information” on major shareholders and the reclusive boss has been there since the days of the Soviet Union.
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