Russia’s equity market has always been cheap, argues USAA‘s Wasif Latif, but at present levels it is just too cheap to ignore. Russia’s economic decline, driven by not only falling oil prices, its main source of income, but also Western sanctions over its intervention in Ukraine has caused a major sell-off that Latif and other asset managers believe is an overshoot. This has brought Russia’s benchmark dollar-denominated RTS stock index to its lowest level since March and before that, a level not seen since Sept. 2009.
“We’re not looking for it to go way up, but looking for it to go up from its near-death cheap to its normal-cheap condition,” said Latif, head of global multi-assets at USAA Investments.
From a high in late June through Oct. 3, the RTS stock index is down over 23 percent. Its market cap is just over $418 billion while the price/earnings ratio is 6.45 with a dividend yield of 4.86 percent.
“Russia, with its warts and all such as its governance issues, poor capital allocations has always been cheap…. We’re buying it in small amounts and by no means are we backing up the truck and loading up on Russia. We are mindful of the risks and buying selectively. We’re more comfortable buying through the ETFs (exchange traded funds) such as the Van Eck Market Vectors Russia or the iShares MSCI Russia Capped fund,” Latif said.