Archive

Reuters blog archive

from Global Investing:

Sanctions bite Russia but some investors are fishing

By Andrew Winterbottom

Russian stocks are up today, for the fifth day in a row and at the highest level in two weeks. What's going on? As we wrote  here earlier in the week, foreign investors have been fleeing this market.  However it could be that some of them are starting to put aside concerns about the potential for further sanctions on Moscow and are scouring Russia's stock markets for contrarian buying opportunities.

Russian stocks, chronically undervalued, are trading now at a discount of more than 60 percent to broader emerging markets, and to China which by all accounts is the standout beneficiary of the Russian woes. Just how cheap Russian shares are can be gauged from the fact they trade at a discount event to turbulent Pakistan. Here is a link that compares Russian equity valuations with other emerging and developed markets:  http://link.reuters.com/guv77v

While tensions between Russia and the West look to be only increasing, the risks of investing in Russia at present are obvious. But with greater risk comes greater potential reward, says Jonathan Bell, head of emerging market equities at Nomura Asset Management:

Even for the level of risk the market is extremely cheap... We've had price movements due to technical behaviour and short-term considerations that don't necessarily reflect the underlying fundamentals.

from The Great Debate:

Putin’s already paying dearly for Ukraine – and looks willing to sacrifice much more

Russia's President Vladimir Putin chairs a government meeting at the Novo-Ogaryovo state residence outside Moscow

Russian President Vladimir Putin has adopted a “go it alone” approach throughout the Ukraine crisis and regularly describes his country as “independent” and nonaligned. But Moscow is not as isolated as Putin makes out. The fact that he cannot see this reality -- or chooses to ignore it -- has produced a series of decisions that has seriously undermined Russia’s global role.

For the past two decades, Moscow has viewed its foray into global institutions as a major success. It has increasingly integrated into the global economy.  Those achievements, however, now present Putin with a major dilemma.

from The Great Debate:

Putin’s anti-American rhetoric now persuades his harshest critics

People I know in Russia, members of the intelligentsia and professionals who have long been critical of President Vladimir Putin’s anti-Western stance, have suddenly turned into America-bashers. Many have been swept away by Putin’s arguments that the United States, not the Kremlin, is destabilizing Ukraine.

Since the current crisis broke in Ukraine over its efforts to side with the European Union rather than Russia, Putin has been at war with the United States. He seems intent on proving that a U.S.-centric world order is over and that Europe should decide on its own what its relations with Russia will be.

from Stories I’d like to see:

The Russian sanctions information gap

Emergencies Ministry member walks at the site of a Malaysia Airlines Boeing 777 plane crash near the settlement of Grabovo in the Donetsk region

There are so many gaps in the reporting about the effort to use economic sanctions against Russia to get President Vladimir Putin to pull back support for the Ukraine separatists that it makes sense to devote my whole column this week to listing them.

Of course, it’s a lot easier to identify the gaps than to do the reporting to fill them. Still, many are so obvious that it suggests that for all the resources spent on getting great video of the Malaysia Airlines Flight 17 crash site, interviews with the victims’ families and reports from the war front in eastern Ukraine -- all important stories -- there is more heat than light being produced when it comes to the most critical, long-term question related to the Ukrainian conflict: If economic sanctions are the global economy’s modern substitute for using military force in repelling aggression, how is that playing out in the first test of that strategy against a global economic player like Russia?

from The Great Debate:

Sanctions finally find Russia’s Achilles heel

Russia's President Vladimir Putin gestures as he chairs a government meeting at the Novo-Ogaryovo state residence outside Moscow

Russian President Vladimir Putin and President Barack Obama were reportedly engaged in a heated telephone conversation last Thursday when Putin noted in passing that an aircraft had gone down in Ukraine. The tragic crash of the Malaysian airliner in rebel-held eastern Ukraine continues to dominate the headlines, but it is important to remember what agitated Putin and prompted the phone call in the first place -- sanctions.

Sanctions against Russia have been the centerpiece of the U.S. response to Putin’s interference in Ukraine. While they primarily have been directed against prominent friends of Putin and their businesses, the underlying target has been a weak Russian economy.  The sanctions have definitely found Russia’s Achilles’ heel, and with harsher sanctions looming in the aftermath of flight MA17, Putin is finding it increasingly difficult to craft an effective reply.

from Hugo Dixon:

What is EU capital markets union?

What is capital markets union? Jean-Claude Juncker, the European Commission’s president-elect, has embraced the goal of creating one for the European Union. But so far it is more of a slogan than a set of policy actions. There’s no harm in having a catchy term to encompass a myriad of specific plans, but the idea needs fleshing out.

The first thing is to clarify the goals. One is to finance jobs and growth throughout the European Union. Another is to have a financial system that is better able to absorb shocks. Banks are shrinking and so can’t do the job of funding economic expansion on their own. Nor are they good at coping with crises. Indeed, they often magnify them, as the credit crunch and euro zone saga showed.

from Hugo Dixon:

UK prepares for possible EU failure

David Cameron looks to be preparing for the possibility that his plan to renegotiate Britain’s relationship with the European Union will fail. The UK prime minister would then campaign for the country to quit the EU in a referendum he plans to hold by 2017. That seems the best way to interpret his appointment of a eurosceptic foreign minister and the nomination of a little-known former lobbyist as Britain’s European commissioner.

This is not to say that Cameron wants to take Britain out of the EU – which would be a historical mistake. It is rather that he apparently thinks quitting could be an acceptable Plan B that would keep him in his job and his Conservative party reasonably united.

from Hugo Dixon:

How to fight UK immigration fears

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

If the UK leaves the European Union, the main reason will probably be because people fear immigrants are overrunning the country. The best way of assuaging these concerns is to show how free movement of people within the EU benefits the economy and society overall, while acknowledging that some groups may be harmed and working hard to improve their lot.

from Anatole Kaletsky:

Karl Marx was right — at least about one thing

 A board displays the Dow Jones industrials average after the close at the New York Stock Exchange

Confidence in the global economy is steadily improving, as shown in the financial markets’ bullish behavior and confident comments from companies and policymakers over the past few weeks. Though these columns have argued in favor of a robust recovery, when investors get uniformly bullish, the pessimistic case deserves attention.

Many distinguished economists believe that the current improvement in global conditions is just a blip. They insist that the world faces years, if not decades, of “secular stagnation.” How seriously should we take them?

from The Great Debate UK:

Europe needs smarter education and research investment

Anka Mulder--Anka Mulder is Vice-President for Education and Operations at Delft University of Technology.  She was formerly Global President of the OpenCourseWare consortium.—

Education and research infrastructure, such as laboratory facilities and digital learning networks, play an increasingly important role in diffusing knowledge and technology to enhance prosperity. At a time when the overall EU budget has decreased for the first time ever, education and research programmes such as Erasmus+ and Horizon 2020 continue to receive significant funding increases, but Europe is still falling behind other areas of the world in building digital infrastructure.

  •