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: