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[loganair] 02/4/2015 09:18

The government expects a fast recovery from economic crisis - Economy Ministry expects growth to resume next year … Yesterday, Economy Minister Alexey Ulyukaev disclosed key figures from the government’s new medium-term forecast for the Russian economy. The Economy Ministry had previously published a macro forecast only for 2015. According to Ulyukaev, after contracting 3% this year, the Russian economy will return to growth and expand at an average rate of 2.5% per annum in 2016-18. Investment activity is also expected to recover as capital investment will grow 3% on average over the next three years. Consumer demand will strengthen thanks to real wage and income growth. Inflation will decline to single-digit levels and will drop to slightly above 7% YoY by the end of 2016. The ruble is expected to appreciate from the average of RUB61.5/$ in 2015 to RUB52-53/$ by 2018, supported by moderate oil price growth. The ministry expects the oil price to grow from the average $50/bbl this year to $60/bbl in 2016, $70/bbl in 2017, and $80/bbl in 2018.

[loganair] 01/4/2015 11:09

Russia's manufacturing PMI, released this morning, was not as encouraging. It came in at just 48.1, missing the consensus estimate of 50 and providing further confirmation that the economy is stagnating. It has also been reported that Russia has denied entry to well-known Finnish investor Seppo Remes, who has a seat in the BoD of several Russian companies, including Sollers, Rosseti and Rusnano. This could have a negative impact on the investment climate in Russia, which is already poor.

[loganair] 31/3/2015 11:50

Gold now accounts for around 13-14% of Russia’s total foreign reserves, up from around 7% this time last year.

[loganair] 28/3/2015 09:43

Russia said to keep $50 oil outlook in budget after crude gains:

Russian President Vladimir Putin’s government told its economic team to stick to a conservative budget for this year as crude oil prices began rising, according to two officials in Moscow.

The government rejected new forecasts prepared by the Economy Ministry this week as too optimistic, the officials said, asking not to be identified as the discussion isn’t public.

Earlier this week, the ministry raised its estimate for this year’s average crude price to $60 a barrel from $50, they said. Oil and natural gas contribute about half of Russia’s budget revenue.

The world’s biggest energy exporter is entering its first recession since 2009, hurt by last year’s ruble collapse, plunging oil prices and sanctions imposed by the US and its allies over the Ukrainian conflict.

The ministry eased its forecast for economic contraction to 2.5% this year at the higher oil price, Kommersant reported Thursday.

The Finance Ministry has backed the government. “We believe the $60 estimate is too high,” First Deputy Finance Minister Tatiana Nesterenko said. “Our forecast for the oil price is $50 to $55 per barrel, and the budget should be calculated using a cautious estimate of $50.”

The government in January approved a forecast of GDP shrinking 3 percent based on $50 oil. That scenario has Russia’s federal budget income falling to 12.5 trillion rubles ($218 billion) this year from 14.5 trillion last year.

The Economy Ministry will revise its forecasts, using a lower oil price, by the end of the next week, the officials said. The ministry’s press service declined to comment.

While Finance Minister Anton Siluanov said last week that the worst is over for the economy and “signs of stabilization” are appearing, recovery is yet to come. Oil, which still traded above $100 seven months ago, is unlikely to reach $70 in coming years, the minister said at a meeting in parliament today.

“The government’s decision to be conservative is correct,” said Evgeny Gavrilenkov, chief economist at Sberbank CIB in Moscow. “It makes no sense to make a decision when there’s no clear trend but just some temporary turbulence,” he said, citing the conflict in Yemen, constantly shifting forecasts on global oil output and consumption and ruble volatility.

[loganair] 26/3/2015 11:42

The government sees clear signs of economic stabilization … Yesterday, Economy Minister Alexey Ulyukaev said that conditions in the Russian economy remain complicated, but there are visible signs of stabilization. Ulyukaev added that consumer inflation has peaked and will gradually decrease in the coming months. However, conditions in the real sector remain complicated, aggravated by the excessively high credit rates and lack of working capital funds. According to Ulyukaev, the real GDP shrank 1.5% YoY in 2M15.

[loganair] 24/3/2015 16:52

Is the Worst Over for the Russian Economy? By Chris Weafer - senior partner with Macro Advisory, a consultancy advising macro hedge funds and foreign companies looking at investment opportunities in Russia.

For investors, business owners and everybody else with an interest or involvement in the Russian economy, this is now a period of waiting; waiting to see whether the relatively good start to 2015 for the ruble, investment returns and some segments of the economy mean that we can all breathe a huge sigh of relief that the predictions of doom and gloom in late 2014 have not materialized, or whether this is just the eye of the storm and another battering still awaits.

Equity investors still generally believe the former, and Russian indices are the best-performing of the major markets so far in 2015 with the RTS up 17.5 percent and MICEX 11.2 percent better, although those returns were higher at the end of February. The indices have fallen by 5 percent this month as concerns about growth re-emerge.

The yield on Russia's 30-year sovereign eurobond is now at 4.9 percent compared to 6.4 percent at the start of the year, and this is despite the downgrade by two of the three international rating agencies of the country's credit status to junk.

In my last column I wrote about the surprising strength of the ruble, which has, at least temporarily, suspended its vulnerability to the oil price. Year to date the ruble has rallied 6.4 percent against the U.S. dollar, with 4 percent of that move since the start of March, during which time the price of Brent crude has fallen 11.5 percent.

The macroeconomic indicators are also generally trending on the positive side of expectations and are pointing to a full-year contraction in gross domestic product of about 3 percent, which would be a positive outcome given the prevailing winds hitting the country.

The continuing positive contribution from import substitution and the substantial increase in federal budget spending have gone a long way to balance out the decline in the consumer and construction sectors and in investment spending.

The state has also played its part in creating the more optimistic backdrop. The Minsk II agreement certainly helps because, despite the still-tough rhetoric from EU leaders at their recent summit, it still offers hope of easing restrictions against raising new external debt in the summer or autumn.

The Central Bank's decision to start easing its benchmark interest rate in anticipation of an earlier, and lower, peak in inflation has also added to the more confident mood as well as reducing debt service costs.

By now you know that there is a "but" coming, and it is a big one. It really is far too early to be confident about the trend in the economy over the medium term or for the next 12 to 24 months. The second quarter was always expected to be the big testing period, and that is the way events are shaping up.

Business and consumer confidence, interest rates and inflation form a big part of what drives activity and investment in any economy, so government spending, which has resulted in a budget deficit equal to more than 10 percent of GDP since the start of the year, and the Central Bank's change in approach to interest rates are a worthwhile gamble to try and improve confidence and provide short-term stability.

But these actions are a gamble nevertheless. The current administrative measures being employed to support the ruble, including a steady conversion of foreign currencies held in the Reserve Fund into rubles, only have a limited shelf life.

The ruble is unlikely to be able to withstand a falling oil price for much longer. If Brent tracks back to $50 per barrel, or lower, then the ruble-dollar rate will move back above 65. The price of Brent crude moved above $60 per barrel in February because of hopes that there would soon be a cut in U.S. shale oil production and that OPEC may be forced into an emergency supply cut.

Neither has happened. U.S. production continues to rise as technology improvements steadily reduce costs and, in any event, producers are making money at the current oil price on a marginal cost basis.

Saudi Arabia and its Gulf allies are refusing to agree to an early meeting to consider a cut in production, while a deal with Iran regarding its nuclear program will open up the country's energy sector for investment and eventually lead not only to a restoration of the 1 million barrels of daily output lost since sanctions were tightened against Tehran, but will lead to a longer-term rise in both oil and gas output.

Iran needs the cash to rebuild its economy and will not agree to hold back as part of an OPEC supply reduction deal. If it is announced that a nuclear deal has been agreed, this will knock the oil price further as traders will factor in future supply growth. In addition to the over-supply issues, the steadily rising value of the U.S. dollar, which is reacting to the expectation of a Fed rate rise this summer, is also a negative factor for the oil price.

For investors and business owners, the Russia challenge goes beyond economics and ruble concerns. The Kremlin's global swagger means that investing in Russia is a lot more difficult than is the case for almost all other emerging economies.

Sentiment, rumors and conspiracies all play a part in creating greater relative volatility and uncertainty, as well as the more tangible factors such as poor rule of law and corruption.

All of which drive the perception of risk and reward and lead to such market swings as, for example, the RTS Index collapsing from over 2,500 to under 500 from May 2008 to January 2009 and then doubling to over 1,000 three months later. We saw the same effect in the ruble market since last September. It is that volatility which both attracts speculative investors and drives longer-term investors crazy.

I recently came across a book, which, while not directly about investment, offers a good template for looking at Russia. Published in 2012, ''Thinking, Fast and Slow'' is by Nobel laureate Daniel Kahneman. One of the topics he discusses is how and why people initially react to news and then change their stance on reflection. He elaborates on that, and makes it very relevant for the Russia story, in a discussion of "what you see is all there is" or WYSIATI.

In other words, people are far too quick to dismiss what they actually see and instead try to create conspiracies or other factors that are simply not there. We see a great deal of this with regard to Ukraine and even recently, Putin's absence from public view has led to dozens of conspiracies and will be a factor in investment risk perception for weeks, if not months. Simple explanations based on WYSIATI are almost always dismissed when it comes to Russia.

Another of Kahneman's discussion points is about "regression to the mean," i.e. nothing ever stays bad or good forever. We saw that with the stock market and the economy in 2008-09 and it provides an explanation as to why investors were willing to pile into Russian equities in January and February.

It also helps explain why there is greater optimism concerning the ruble and the economy today than there was at the end of last year. However, based on the visible facts, it is far too early to assume the worst has passed.

[loganair] 20/3/2015 12:45

No reasons for Russian market to move higher - The Russian market opened strongly yesterday, as the RTS index gapped up 3.6%. However, a strong decline in oil, as Brent futures lost more than 2% during the day, cooled interest in Russian stocks. The macro data released yesterday confirmed that the Russian economy is stagnating, as February retail sales fell 7.7% YoY compared to the 5.8% drop expected and real wages slid 9.9% YoY versus the 8.8% expected.

[loganair] 20/3/2015 12:41

Sistema use to be JRS 7th Largest Investment before the share price completely fell out of bed to a low of under 10 roubles per share. However JRS retained it´s holding in Sistema. Over the past few months Sistema´s share price has over doubled.

Ural-Invest to pay RUB46.5 bln; net gain of $1.4/GDR for Sistema. Yesterday, AFK Sistema’s (SSA LI – Not Rated) announced it settled out-of-court with OOO Ural-Invest regarding the execution of a court’s decision for damages related to the sale of shares in Bashneft. According to the out-of-court settlement, Sistema should receive RUB46.5 bln ($775 mln), 34% less than the RUB70.7 bln ($1.2 bln) payment ordered by the court decision. Sistema will also spend 10% of this amount to fund the socially important projects which had previously been financed by Ural-Invest. The agreement needs to be approved in court, which should take place within one month. The agreed amount will increase Sistema’s net asset value by about $1.4/GDR or 21% of yesterday’s closing price.

[binladin] 19/3/2015 15:08

Oil is going lower. Markets could go lower.....in the short term...

[binladin] 19/3/2015 13:15

MOSCOW--Russia is set for financial and economic stabilization and recovery, Finance Minister Anton Siluanov said Thursday, having endured the worst of the crisis.

Speaking at an annual business forum, Mr. Siluanov said that Russia has passed a "peak of negativity" and its economy will start recovering as soon as investment activity rebounds. For that Russia needs to tame inflation and to substantially slow it from the current level of around 16%.

Mr. Siluanov said he expects inflation to slow to 11% to 12% this year and further to 6% to 7% next year.

The finance ministry's expectations that inflation will slow soon underpins the Bank of Russia's decision to cut rates last week.

In its statement the Bank of Russia said that rates were still high enough to tame inflation. But for the moment, the country's rapid economic slowdown was of more-immediate concern than price rises, the bank said.
Net asset value is 9p higher then yesterday.....

In another sign of growing confidence, Alexei Ulyukayev, the economy minister, said that capital outflows in 2015 will be below the previously forecasted $115 billion, possibly even below $100 billion.

Mr. Ulyukayev also said that the country's gross domestic product is set to reach 2% to 2.5% in 2016.
The peak on JRS.L was 800p and it is now on 336p along way to go.....

[binladin] 18/3/2015 14:50

War is never the solution. Peace is the way forward...
Ready to rocket....

[binladin] 17/3/2015 16:10

Buyers moving in nowhere else to park their hard earned cash...

[loganair] 17/3/2015 15:50

Will they as most invest Emotionally and therefore have difficulty in seeing the logic.

[binladin] 17/3/2015 15:46

The only market that is undervalued is the russian every other market has hit new highs....investors will see the logic...

[loganair] 17/3/2015 10:56

binladin - The sentiment is against Russia at the moment so unlikely to see a huge rally short term, during 2015.

Interest rates have been cut by 3 1/2% from there December high to 14%. Russia's interest rates are normally around 8% to 10%.

It is important for the Russian state budget that the oil price is kept at at least 3,600 roubles/bbl. Therefore as the oil price falls as does the rouble against the dollar. Therefore a stronger rouble is not what Russia is looking for when the price of oil is so low, they are looking for a weaker rouble.

[binladin] 16/3/2015 15:48

Should see a huge rally.....

[binladin] 13/3/2015 16:11

Interest rate cut should rally big time.....
1 lower interest rates
2 stronger rouble
3 higher oil prices
4 no war with ukraine
All point to a better share performance.

[loganair] 13/3/2015 10:17

Strong sales growth - Sales rise 28.5% YoY; revenues at neighborhood chain outgrow Magnit’s neighborhood stores. Yesterday Dixy Group (DIXY RX)(JRS 9th Largest Investment) published a strong trading update for February. Consolidated revenues increased 28.5% YoY to RUB20.2 bln ($313 mln). Sales growth slowed 2.2 ppt MoM, which is similar to the trend seen at market leader Magnit (MGNT LI). Sales at Dixy neighborhood stores, which have historically grown the fastest, increased 31.7% YoY to RUB16.3 bln ($252 mln), which was again faster than the sales growth of 29.65% at Magnit’s neighborhood stores. Victoria division’s sales rose 19.2% YoY to RUB2.6 bln ($40 mln) and revenues at the MegaMart division rose 13.3% YoY to RUB1.4 bln ($21 mln).

[loganair] 13/3/2015 10:14

Year ends on a positive note, 2015 outlook mixed - Fees growth even more impressive than forecasted. Moscow Exchange (MOEX RX – Not Rated) (JRS 5th Largest Investment) published 4Q14 IFRS results yesterday, beating consensus EBITDA and net income estimates by 5% and 6% due largely to impressive fees dynamics. Net commission income came in 13% above consensus in 4Q14, up 38% QoQ and 22% YoY, thanks to the bond, FX, money market and depositary segments. Net interest income was about in line with consensus, up 34% QoQ and 24% YoY. The average investment portfolio grew 23% QoQ during the quarter, with the share of ruble assets (which deliver most of the income) increasing 2 ppt QoQ to 24%, which is still not very high. As a result, while the indicative MosPrime rate jumped more than 3 ppt QoQ, the effective yield rose only 20 bps QoQ to 2.1%.

[loganair] 12/3/2015 16:44

Most Great Investments Begin in Discomfort: Is Russia Turning a Corner? by Jeremy Schwartz:

I recently attended the Chartered Financial Analyst (CFA) Institute’s annual forecast dinner in Denver, where the keynote, from a major asset manager, reviewed equity valuations across the world. He commented that there are not many equity regions that look particularly attractive compared to their histories, unless one is buying Russian companies.

His remark generated a chuckle from the audience, showing deep skepticism about such a position today. But that’s not the whole picture. The CFA Institute surveys its 120,000 global members annually; for 2015, the top four countries that members favored were the United States (by a large margin), China, India and Russia. So, despite the skepticism, a number of strategists are still eyeing the depressed Russian market.

Steep Discounts:

“Most great investments begin in discomfort. The things most people feel good about—investments where the underlying premise is widely accepted, the recent performance has been positive and the outlook is rosy—are unlikely to be available at bargain prices. Rather, bargains are usually found among things that are controversial, that people are pessimistic about and that have been performing badly of late.”

—Howard Marks, chairman, Oaktree Capital Management, Renown Value Manager

Russia is currently selling at an extremely discounted valuation. It is currently out of favor due to the huge collapse in oil prices—many of the large Russian companies are in the oil business—and as a result of the sanctions Russia is enduring over the political situation in Ukraine.

When we evaluate the median P/E ratios of major equity regions over the last 20 years, the broad MSCI Emerging Markets Index is trading very close to its longer-run historical median P/E ratio. But Russia stands out, both for its low single-digit number and because it is selling at nearly a 50% discount to its historical median level. Of course, earnings may fall in the next year, given the collapse in oil prices, but even a 50% fall in earnings would leave Russia selling at a large discount to the rest of the emerging markets.

Companies or countries are very often attractively priced for very good reasons. Referring to Marks’s words, Russia is a place of discomfort for investors today. But some of the very best returns over the long run can be found from such dislocations in the market.

[binladin] 11/3/2015 15:01

No war so market will rally...

[loganair] 10/3/2015 10:32

February RAS results: marginally better but times remain difficult - Sberbank (SBER RX – Buy) (JRS 10th Largest Investment) published February RAS results on Friday. Corporate and retail loans shrank MoM 5.6% and 0.4%. Ruble appreciation of 12% MoM in February affected the revaluation of the corporate portfolio, which the market estimated would otherwise have contracted 2% MoM. According to the bank, corporate deposits net of revaluation added 6.2% MoM, while retail deposits rose 1.9%. Ruble appreciation also led to a relatively low monthly provision charge with COR of 1.1% compared to 4.1% in January, but at the same time the revaluation resulted in losses from forex operations.

[loganair] 06/3/2015 13:58

binladin - Asset value rises does not necessarily mean the JRS share price will rise the equivalent amount, just means the NAV widens or narrows.

JRS being an Investment Trust the price not only depends on the price of the assets being held, also depends on sentiment of the assets and where the assets come from.

[binladin] 06/3/2015 13:40

Asset value is 10p higher so the share price should go up 10p...the net assets are going up on a daily bases,it has gone up 10p from yesterday...