07/20/2015, 00.00
RUSSIA
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Russia is the most attractive BRICS market for investors

by Nina Achmatova
For Bloomberg, Russia has overtaken China, where volatility prevails in equity markets. Investors are betting on lower political risks in Russia and an economic recovery in 2016.

Moscow (AsiaNews) – Russia has become the most attractive market among BRICS countries (Brazil, Russia, India, China and South Africa) for investors in 2015, replacing China as the top earner, this according to the Bloomberg news agency.

Concerns over falling oil prices and the collapse of the ruble at the end of 2014 have largely dissipated, with investors betting on fewer political risks for Moscow.

According to Bloomberg, “the tables have turned in these seven months." Crude has rebound, and investors have calmed down over the country’s troubles.

Oil has stabilised above US$ 55 a barrel and a cease-fire is holding in eastern Ukraine, whose crisis the West has blamed on Russia.

The latter’s volatility index has dropped by more than half to 28 per cent, the steepest decline since 2006.

Analysts surveyed indicate that Russian stocks are valued at less than half of their BRICS peers, and could bring higher profits if political risks ease further.

“Our models are telling us to buy Russia,” Tim Love, a London-based investment manager at GAM, told Bloomberg.

“Most Russian stocks are fundamentally undervalued,” said Mattias Westman, the London-based founder of Prosperity Capital Management, a major asset investment firm heavily involved in former Soviet republics. “There is potential for further recovery,” he explained.

Russia’s economy, set to contract this year for the first time since 2009, may rebound 0.5 per cent in 2016, a Bloomberg survey shows.

At the same time, European economic sanctions over the Ukraine are likely to be relaxed, as it will not be “easy to convince everyone to prolong them” next year, Westman said.

In nominal terms, Russia’s benchmark Micex Index has advanced 18 per cent this year, 4 percentage points lower than the Shanghai Composite Index.

However, a record drop in Russian volatility, combined with an increase in Chinese price swings, left returns adjusted for such fluctuations superior for Moscow by a factor of 1 to China’s 0.6, according to the data. For Bloomberg, this represents the best gain among BRICS members.

In July, the instability caused by the bursting of China’s bubble cut the value of Chinese shares, sending Shanghai to the bottom of the riskless-returns table.

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