Russian markets are experiencing their very own Trump rally - quite understandable - because well, you can bet those sanctions aren't going to be around for long, and oil prices seem to be heading north again, convincingly this time, and lastly, fundamentals don't look bad at all.
The hall at the Waldorf Astoria hotel in New York was packed for a Moscow Exchange promotional event in the middle of November. Fund managers and investment bankers came out to hear the MOEX pitch. The star guest was former finance minister and co-head of the presidential council Alexei Kudrin, who highlighted the solid macro-fundamentals and the government’s commitment to implementing a realistic reform plan to put the country back on a growth path. And he had a good story to sell. For example, in 2014 many analysts were predicting Russia would run out of money; this November gross international reserves were up on the year by some $30bn to $400bn – the equivalent of 18 months of import cover.
And it seems it is American investors who are driving the momentum:
Despite the fraught east-west politics of the last two years, it has been US investors who have played one of the largest roles in pushing up valuations. Washington and Brussels may not have forgiven Russia for annexing Crimea, but the markets have.
“American investors started piling into Russian equities on Moscow Exchange long before the results of the US election. In fact, American investors are one of the fastest growing subsets, having increased their holdings from around 41% of total foreign ownership in 2013 to 52% in the first nine months of 2016,” Evgeny Fetisov, chief financial officer of MOEX and member of the executive board,
But the main driver is optimism about US-Russia relations:
But rising oil prices have only poured oil on a fire that was already ablaze. Probably the most important change is the slow cooling off of tensions between Washington and Moscow. Donald Trump’s victory has led to optimism that relations between Russia and the US could improve dramatically
The Russian economy is doing fine and is fundamentally attractive:
But more fundamentally it has been Russia’s ability to weather the sanctions storm and the building economic momentum that should turn into a return to economic growth in 2017. Russia remains a massive consumer market and is littered with natural resources that make it one of the most attractive markets in the world – even if you are only interested in the domestic market action.
Looks like the Trump years will mean salad days for Russia.
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