Global Investing

Russia — the one-eyed emerging market among the blind

It’s difficult to find many investors who are enthusiastic about Russia these days. Yet it may be one of the few emerging markets  that is relatively safe from the effects of “sudden stops” in foreign investment flows.

Russia’s few fans always point to its cheap valuations –and these days Russian shares, on a price-book basis, are trading an astonishing 52 percent below their own 10-year history, Deutsche Bank data shows.  Deutsche is sticking to its underweight recommendation on Russia but notes that Russia has:

“become so unpopular with the investor community that it is a candidate for the ‘it’s so bad it’s good’ club as evidenced by the very cheap valuations and long-term  underperformance.

The real game changer however is outside financing needs. Quite simply, Russia runs a current account surplus and is therefore in a better position than India or Turkey which will face a funding crunch if foreign money stops coming in.

Analysts at Morgan Stanley reckon that out of 20 big emerging economies, Russia is the least vulnerable to the sudden stop syndrome. They point to the following factors:

from Summit Notebook:

Tax evaders on the run

  By Neil Chatterjee
    The U.S. has promised it will hunt down tax evaders.
    And it seems tax evaders are on the run.
    DBS bank, based in the growing offshore financial centre of
Singapore, told Reuters it had been approached by U.S. citizens
asking for its private banking services. But when told they would
have to sign U.S. tax declaration forms, the potential clients
disappeared.  
    Swiss banks also approached DBS on the hope they could
offload troublesome U.S. clients to a location that so far has
not been reached by the strong arms of Washington or Brussels.
    DBS said no thanks. In fact many private banks and boutique
advisors now seem to be avoiding U.S. clients.
    Will this spread to other nationalities, as governments
invest in tax spies and tax havens invest in white paint?
    Is this the end of offshore private private banking?

from Funds Hub:

Great expectations

It was the outcome most commentators were expecting.

rtx9j4vEven Roger Lawson of the UK Shareholders' Association, which represented 150,000 small investors, admitted it was "not totally unexpected".

But the defeat for hedge funds RAB Capital and SRM Global and other former shareholders claiming damages for the loss of their holdings in Northern Rock when it was nationalised last year is nevertheless a hard blow to bear.

The former shareholders may appeal, but a valuation of the equity at zero or close to zero is now looking entirely possible.