Asian Financial Forum 2015, Hong Kong

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Thursday
Mar012012

"Russia has never been in better shape!"

 

These are the words of Marcus Svedberg, Chief Economist of East Capital who made his first ever visit to Australia this week to meet with potential and existing investors. With the Eurozone already in recession, and likely to remain so for some time to come, Russia is looking increasingly attractive from an investment perspective due to its strong economic fundamentals:

  • Steady GDP Growth (currently hovering around 4% p.a.) driven by high oil prices and buoyant domestic demand
  • Inflation close to an all time low (also around 4%) with falling food prices and decelerating monetary growth
  • Enlightened monetary policy via a flexible RUB and inflation targeting
  • Excellent public finances - a small budget surplus in 2011, low levels of debt (10%) and large reserves
  • Strong domestic consumption driven by rising incomes, low inflation, almost non existent personal debt (the average Russian has a mortgage of Euros 130 compared to Euros 12,370 in the Eurozone!) and a rapidly increasing numbers of aspirational, cashed up and upwardly mobile middle class consumers
  • Accession to the WTO will boost GDP and open up the economy for global trade
  • Russian oil companies have started to pay dividends for the first time (but remain undervalued)
  • New political and economic reforms promised by Putin under pressure in the run up to the Presidential election this weekend (which Putin is expected to win comfortably, despite negative comments in the media) are encouraging and long overdue.

East Capital's Russian Fund is up 22% so far in 2012 and expected to rise further after the Presidential election. The market remains cheap and valuations are at rock bottom with the chances of a re-rating at some stage.

Investors should look closely at Russia now to get in before the rush!!

Our regular videopocast, "Think Global with David Thomas" included an interview with Marcus Svedberg and can be viewed here:

 

Reader Comments (1)

Great post, concise and to the point, I couldn't agree more..

Russia has definitely the best personal and governmental financial picture within the BRICS, lagging behind on an industrial level though given its dependency on oil. Also consistent GDP growth, even if not overly high comparing to the other BRIC nations, is a great sign..

I just discussed the mortgage thing 2 weeks ago with a Russian friend who explained that many families benefited during the communism era on the property end due to very favorable conditions. This has apparently lead to a high property ownership rate amongst Russians, partly explaining to low average mortgage value..

On a personal finance level, Russians certainly have a very economic stimulating behavior with low
debt and still quite high levels of consumer spending. In the long-term, given political stability and good taking advantage of the WTO membership, that will be a great driver for a growing and sustainable economy.

One further economic driver are government projects (127 current projects with a spending of around 60-70 bn U$D per annum).

March 2, 2012 | Unregistered CommenterGuilherme Nunes

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