Share Name Share Symbol Market Type Share ISIN Share Description
JP Morgan Russian Securities LSE:JRS London Ordinary Share GB0032164732 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +3.00p +0.59% 510.00p 508.00p 512.00p 512.00p 510.00p 510.00p 76,915 14:05:43
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 0.0 14.4 24.0 21.3 256.42

JP Morgan Russian Securities Share Discussion Threads

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DateSubjectAuthorDiscuss
09/8/2018
10:31
andyj - Many of the big Russian companies are making record profits. Gazprom is exporting a record amount of gas to Europe. The Russia Government Budget is going to be one of the few countries that will be in Surplus.
loganair
09/8/2018
04:14
More sanctions with the likelihood of more draconian sanctions in November. Difficult to see the fund making any definitive upward movement, despite the incredible potential here.
andyj
19/7/2018
10:58
Russia is continuing to diversify state reserves away from US debt. The latest data from the US Treasury shows that Russia's share hit an 11-year minimum and totaled only $14.9 billion. The share of US sovereign debt bonds in Russia's portfolio has been reduced dramatically in recent months. Russia held $96.1 billion in US Treasuries in March before selling half its holdings in April, dropping to 22nd place among major foreign holders of American treasury securities at $48.7 billion. The head of the Central Bank of Russia (CBR) Elvira Nabiullina said in May that slashing of the holdings was result of the systematic assessment of all kinds of risks, including financial, economic and geopolitical. It is interesting to note that the CBR Foreign Exchange Reserves have risen over the past month which strongly suggests they have been replacing their dollar reserves with other currencies.
loganair
02/7/2018
14:41
Russia and Saudi Arabia want to invite all OPEC members to create a permanent alliance - the "super OPEC", in which, of course, these countries will take the lead. For Russia, this is an undoubted advantage, and Saudi Arabia can play the role of a long-term partner and ally,” TeleTrade's leading analyst Anastasia Ignatenko said. In such an alliance, countries can pay less attention to US pressure, because Russia and Saudi Arabia account for one-fifth of all oil produced in the world, she notes. “This will automatically ensure control of the oil market and the security of its interests.” Russia and Saudi Arabia will have the opportunity to increase oil production on their own, since many OPEC countries are unable to boost output despite last week's agreement.
loganair
02/7/2018
14:28
At the beginning of the year there was talk about $80 oil, then a couple of months ago $90, today there is talk of even $100. If $100 oil turns out to happen then the Russian Government will be swimming in money as will their big energy producers.
loganair
28/6/2018
14:46
Russia appears to be oblivious to EM problems, chart looks good, maybe about to re-rate?
velvetide
27/6/2018
09:14
With the sanctions on Iran the analysts are talking about the real possibility of $90 oil, which will mean much bigger profits for the likes of Gazprom, LukOil and Rosneft. At the current oil price Russia already has a budget surplus of $16bln. $90 oil will add a further $20bln plus to the Russian government budget. What ever anyone thinks about Russia in Crimea, because of Russian investment in their agriculture this year Crimea will see a record grain harvest.
loganair
25/6/2018
10:37
The most interesting thing is that the dollar assessment of the Russian gold and foreign exchange reserves for April increased by $1.3 billion. I.e., the narrative that bonds were sold to urgently patch some financial hole is absolute groundless. The American bonds were sold, and the received means were invested in some other assets. The central bank publishes its reports on the management of reserves with a big time lag, and we will learn the exact answer to the question “what assets were the received dollars invested in” approximately in half a year, but it is possible to consider some possibilities already now. One scenario is the ratio of currencies in the Russian gold and foreign exchange reserves underwent serious revision, and the proportion of dollar assets was significantly reduced due to the sale of American bonds and the purchase of securities in other currencies — most likely, in Euros. It is precisely such a scenario that represents the greatest interest from the point of view of western analysts, some of who see these Russian financial manoeuvres as a rehearsal of similar actions that may be taken by the People’s Republic of China. Other factors could also be as the Fed raises interest rates the value of US Treasuries fall. "We are diversifying the foreign exchange part of our reserves," Nabiullina the CBR Governor noted, speaking at the Russian State Duma on June 19.
loganair
19/6/2018
17:46
The Central Bank of Russia (CBR) commonly factors in all kinds of risks when allocating the country's reserves, said the CBR chief, commenting on a major sell-off of US Treasury bonds. “We pursue the policy of safe and diversified holdings,” CBR Governor Elvira Nabiullina said while answering questions before Russia's lower house of parliament. “We assess financial, economic and geopolitical risks while allocating the country’s financial reserves.” The comments came shortly after the latest statistics showed that in April, CBR dumped some $47bn out of $96.1bn it had in US treasury bonds, accounting for nearly half of Russia’s overall holdings. The step moved Russia six places down to 22nd place on the list of major foreign holders of US debt. Nabiullina refused to say what the central bank did since April. “We reveal the information about investments with a time lag of around six months. That’s the Central Bank’s policy.” she said. “We do not disclose the most recent information, as we are the biggest holder of Russia’s reserves. When we publish the data, the entire new structure will be clearly seen.” It is interesting to note as at the end of May that the Russian Central Bank was holding a similar amount of Foreign Exchange in its reserves as it did in March and April therefore what has the CBR replaced its US treasury bonds with?
loganair
19/6/2018
17:44
The Central Bank of Russia (CBR) commonly factors in all kinds of risks when allocating the country's reserves, said the CBR chief, commenting on a major sell-off of US Treasury bonds. “We pursue the policy of safe and diversified holdings,” CBR Governor Elvira Nabiullina said while answering questions before Russia's lower house of parliament. “We assess financial, economic and geopolitical risks while allocating the country’s financial reserves.” The comments came shortly after the latest statistics showed that in April, CBR dumped some $47bn out of $96.1bn it had in US treasury bonds, accounting for nearly half of Russia’s overall holdings. The step moved Russia six places down to 22nd place on the list of major foreign holders of US debt. Nabiullina refused to say what the central bank did since April. “We reveal the information about investments with a time lag of around six months. That’s the Central Bank’s policy.” she said. “We do not disclose the most recent information, as we are the biggest holder of Russia’s reserves. When we publish the data, the entire new structure will be clearly seen.” It is interesting to note as at the end of May that the Russian Central Bank was holding a similar amount of Foreign Exchange in its reserves as it did in March and April therefore what has the CBR replaced its US treasury bonds with?
loganair
18/6/2018
17:28
At the current share price the dividend yield for this year is expected to be above 6%. The Company's current income forecast for the year indicates continuing growth in dividend income. Following the pattern of the previous year, the Company's interim dividend is expected to be considered by the Board for declaration in September 2018 and is likely to represent the large majority of the total annual dividend, with a significantly smaller final dividend being recommended for approval by the shareholders at the Annual General Meeting for payment in March 2019.
loganair
08/6/2018
18:43
When the next EU vote on maintaining sanction on Russia comes along the new Italian government as said they will vote against continuing to maintain sanctions. In order for the EU to maintain its sanctions against Russia all 28 member states have to vote in favour.
loganair
03/6/2018
10:04
Mark Mobius tilts towards China, South Korea and is also bullish on Brazil and Russia where consumer Discretionary goods and services benefiting from domestic consumption growth in these countries. "The opportunities are incredible for the right investment." He remains optimistic in the emerging markets of Vietnam, China and India and believes we're going to see lot's of opportunities in these markets down the road especially India has got tremendous opportunities. Mobius also small- and mid-size mainland Chinese companies public in Hong Kong. Fintech is a focus area, as is firms that assist traditional corporations to better deploy internet technologies. "That's where the growth opportunities are," he said. "China is now a huge market, and it's growing because we are now getting more and more access," he said. “With the A-share market coming into the availability of foreign investors, the opportunities are incredible”. He also says he expects a 30% correction in the US market as a result of massive out flows from ETF's. Currently global ETF stock assets stand at $4.7 trillion.
loganair
25/5/2018
19:58
The International Monetary Fund has revised its outlook for the Russian economy, and there is some good news for Moscow, IMF Chief Christine Lagarde said at the St. Petersburg International Economic Forum (SPIEF). “Russia has put in place an admirable macroeconomic framework—saving for a rainy day, letting the exchange rate float, introducing inflation targeting, and shoring up the banking system,” she said. “As a result, it was able to weather tough times well, and today it has virtually no fiscal deficit, a solid current account balance, and very little debt.” To achieve more, Russia should increase productivity, diversify its economy from oil and gas, boost investment in healthcare and education, as well as reducing market concentration, and integrating more into the global economy, Lagarde said. As for the global economic outlook, Lagarde said the IMF is optimistic. Last year, global growth was 3.8 percent, the fastest since 2011, and it is likely to grow 3.9 percent this year. “Once again, the momentum is broad-based, encompassing the United States, Europe, Japan, China, Russia, and many other emerging market and developing countries,” she said There is bad news too. “The not-so-good news is that there is a risk of storms in the forecast. Global debt is at a record high—public and private debt together has reached $164 trillion, or 225 percent of global GDP,” Lagarde said. “Financial stability is also looking fragile, due to high debt and rising financial market volatility—especially from the increasing risk of capital flow reversals in emerging markets. And there are darkening clouds from the risk of a retreat from global trade and multilateral cooperation,” she added.
loganair
25/5/2018
15:22
In 2017, trade between Germany and Russia grew significantly despite sanctions. German exports to Russia increased to €25.9 billion ($31.9 billion), while imports from Russia grew to €31.4 billion ($38.7 billion). The figures represent a 20.2 percent rise in exports and an 18.7 percent growth in imports, according to the German Federal Statistical Office data.
loganair
23/5/2018
15:25
Russian economic recovery under way in April despite sanctions: Retail sales in Russia picked up in April, while real wages growth exceeded expectations as the unemployment rate fell, suggesting an economic recovery was under way, according to data released on Tuesday. After two years of recession caused by a slump in oil prices and Western sanctions, the Russian economy is now recovering along with oil, the rouble has generally stabilized and global commodity prices remain favorable for an economy dependent on exports of energy and raw materials. Retail sales, the key gauge for consumer demand, the primary driver of economic growth, were up 2.4 percent year-on-year in April after a 2.0 percent rise in the year to March. Capital investment, the next most important driver, was up 3.6 percent year-on-year in the first quarter after increasing 1.4 percent in the same period a year earlier. “The latest Russian activity figures suggest that GDP growth picked up to about 1.5 percent year-on-year at the start of the second quarter,” the research firm Capital Economics said in a note. “These data also provide early evidence that the tightening of U.S. sanctions and the fall in the ruble in early April have had little impact on the real economy so far.” This year, the economy is projected to expand by 1.5-2.0 percent, according to the central bank’s forecasts, after growing by 1.5 percent in 2017. Real wages, which are adjusted for inflation, rose 7.8 percent year-on-year in April, beating analysts’ call for a 5.9 percent increase. At the same time, the unemployment rate inched lower to 4.9 percent in April, its lowest since August 2017, from 5.0 percent in March.
loganair
22/5/2018
10:07
Syme, manager of the JO Hambro Global Emerging Markets Opportunity said 'Russia is the biggest emerging market beneficiary of oil price rises.' It produces an annual 2.9 billion barrel oil surplus. Oil's move from an average price of $54 in 2017 to $77 last week is worth $67 billion to the country, or 4.3% of GDP. ‘At this oil price, Russian assets should be performing very strongly, yet the Russian ruble has fallen 7.8% against the US dollar year-to-date.’ ‘Politics notwithstanding, if there is one emerging market that most benefits from this environment, it is Russia.’
loganair
21/5/2018
09:30
Despite U.S. sanctions impacting on some elements of Russia’s foreign trade, recent reports suggest that, in part because of the strong oil price the country is currently running a budget surplus.
loganair
19/5/2018
14:42
Higher oil prices are here to stay. Here’s why, and what to buy by Dr Matthew Partridge: Eleven months ago, the price of Brent crude oil was less than $45 a barrel; a few days ago it breached $80 for the first time since November 2014. To make sense of what’s going on, I approached Richard Hulf, who, with John Dodd, manages the Artemis Global Energy Fund. This fund primarily invests in oil and gas stocks, along with companies in the wider energy industry. A lot of pundits have focused on rising tensions in the Middle East, especially the recent decision of the United States to pull out of the Iran deal. However, Hulf thinks that the changes can be explained by “supply and demand with a bit of geopolitics layered on top”. On the demand side, “demand from emerging markets continues to increase strongly, while even developed countries are still consuming crude in large amounts”, says Hulf. Electric cars are starting to emerge as a mainstream product that could hit oil prices down the line, but “they will take longer to emerge than everyone predicts”. At the same time, as “oil majors have bowed to shareholder pressure and have cut capital expenditure to boost returns on capital”, the supply of crude oil has weakened, with inventories declining. In the longer run, Hulf is bullish on crude, though he does accept that “in the medium term a significant number of projects will be coming online”. He estimates that fundamentals alone can support a crude price of around $70, while geopolitical tensions could keep the price significantly higher. The US shale boom is overhyped: The shale oil boom has dramatically boosted US output over the last five years, but it has been “overhypedR21;, and, as a geologist, Hulf says “it is clear that the Perriman Shale Basin could never match the reserves of somewhere like Saudi Arabia”. This may seem pessimistic, especially compared with the optimism of a few years ago. However, Hulf claims that his analysis of shale’s potential is shared by shale firms themselves, since “even they’ve admitted to me that they are close to their technical limits”. Another problem with shale oil is that “there is a massive lack of export infrastructure, which means that it is very expensive to transport”. As a result, it sells at a large discount to the global price “which is discouraging short term investors”. Overall, “the whole idea that shale oil could produce an uncontrolled and unbridled expansion of oil and gas production was unrealistic”. Three oil stocks to buy now: Given these views, it should come as no surprise that the Global Energy Fund has recently reduced its investment in American shale companies. Instead, he is now focusing much more on traditional deepwater drilling. One company that he likes is Lukoil (LSE: LKOD), the Russian energy company (currently his sixth largest position accounting for 3.8% of the fund’s portfolio). Hulf particularly likes the fact that it “has a lot of promising assets in the Caspian Sea”. Another company that he strongly recommends is Encana Corporation (NYSE: ECA), Canada’s largest natural gas producer, due to its “diverse portfolio and strong production base”. Global Energy Fund’s third large holding is CNOOC Limited (NYSE: CNO), a subsidiary of China National Offshore Oil Corporation. Hulf likes this stock because of its exposure to Chinese offshore gas. However, he is also interested in a project in Guyana, in South America, which CNOOC is developing in association with Exxon. Overall, he thinks that investors should look for companies “that have an interest mix of high-quality energy assets”. Hulf is also “very interested in the transition of gas, but less so in the destination”. Renewable energy returns are not good enough: Finally, Hulf is very sceptical about renewable energy companies. For him, their biggest problem is that “they are simply not generating enough returns to be worth considering, and are unlikely to do so in the next five to ten years”. This is important, because his fund’s stock selection gives a large weight to profitability and returns on capital. If pressed, he thinks that it might be worth looking at onshore wind as a “potential target”. However, he cautions investors against them, because of their inherent volatility. The problem is that most renewable companies depend on large subsidies to stay afloat, “which can be removed at any time”.
loganair
19/5/2018
14:39
Rosneft (JRS 6th Largest Investment) has announced it is going to pay out 50% net income as dividends. The Global Energy Fund has recently reduced its investment in American shale companies. Instead, he is now focusing much more on traditional deepwater drilling. One company that he likes is Lukoil (JRS 3rd Largest Investment), the Russian energy company (currently his sixth largest position accounting for 3.8% of the fund’s portfolio). Hulf particularly likes the fact that it “has a lot of promising assets in the Caspian Sea”. Overall, he thinks that investors should look for companies “that have an interest mix of high-quality energy assets”. Sberbank has now dropped to being JRS 2nd Largest Investment being over taken by Gazprom as JRS Largest Investment.
loganair
10/5/2018
21:37
Russian gas sales to EU hit record high despite sanctions: European countries boosted imports of Russian gas to unprecedented levels in April with overall supplies in 2018 expected to climb above 200 billion cubic meters for the first time ever, ignoring the impact of strained relations. In the first quarter of this year, Gazprom’s (JRS 2nd Largest Investment) gas deliveries to Europe reportedly increased by 6.6 percent to $12.4 billion against the same quarter a year ago. The deliveries to European countries kept on growing last month, even after the winter heating season ended. The official added that Gazprom expected demand in summer 2018 to get close to winter levels. According to rough estimates, the company may sell a record volume of natural gas throughout the entire history of gas exports, including the Soviet period. Gazprom’s gas supplies to European countries hit an all-time high in March, beating a previous record Meanwhile, the Russian gas monopoly continues hurdling antitrust barriers to build the Nord Stream 2 pipeline that is aimed at doubling the existing capacity of the Nord Stream pipeline from Russia to Germany. Gazprom also completed the deep-water section of first thread of the Turkish Stream gas pipeline. Last month, the company said it was ready to build the Nord Stream 3 pipeline, if necessary.
loganair
03/5/2018
12:15
China, Russia and Gold in the De-Dollarizing World - An asset backed currency, used by Russia and China, may be the biggest challenge to Emperor Dollar: Trending and gaining traction throughout the economic world is the increasingly relevant search for safe and secure alternatives to the US Dollar. Some due to geopolitical reasons and pressures, others from recognizing the significantly deepening debt associated with the US Dollar and government. Many have started questioning and doubting aspects of its sustainability and inviolability over the ballooning short and long term. Recently underscored by expected “trade negotiations” with the US’s largest debt holders (Japan & China) which are now apparently to include exploring aspects of sovereign debt restructuring. Others are looking to innovative crypto ideas in the hope that extra-governmental blockchain backed mechanisms of peer-to-peer “agreed value” might be the path to securing wealth. In short, all of these approaches are looking for the security which gold together with similar recognized hard assets like silver have provided and assured since the dawn of our varied successive civilizations. China, Russia, Turkey and quite a few others see themselves sanctioned, shackled and hindered by the overwhelming market dominance of the American currency and the quickly changing policies linked to it by successive US administrations most especially of late. Some refer to this as the “weaponization” of the US Dollar as this millennia’s new normal. The tariffs introduced by the US government as a form of behavior modification for other nations are understandably unappreciated and are increasingly resisted. It is likely that worsening currency as well as trade tiff’s are in the cards. The Chinese yuan is gaining internationally among users. Russia, Turkey, and Iran are making payments in their national currencies. Iran recently announced a switch from the dollar to the euro as its reporting currency. (NOTE - as soon as Iran made this announcement the US Government said it is going to abandon the nuclear deal it has with Iran and will reintroduce sanctions.) Russia and China already have a currency swap agreement that avoids settlements in the greenback. Even Saudi Arabia will have to make a choice probably sooner than later, to stay with the petrodollar fix, or go with its biggest customer – China and therefore the yuan. China is Russia’s largest trading partner with 15% of Russia’s international trade for 2017. This year it has grown to 17.2%. In 2014 just 2% of payments for Russia’s exports to China were paid in rubles, and 9% of China’s exports to Russia were paid in yuan. In 2017, this has increased to 9% and 15% respectively and continues to grow. There is persistent speculation and growing talk in the financial markets that Russia and China may be discussing expanding the role gold, silver and possibly other hard assets might have in realigning the value of both the yuan and the ruble independently of the US Dollar. So far it remains in the realm of rumors, then again that too is a start. Whether this remains rumor, or emerges as something more, it is a topic well worth examining if only from a risk management point of view. There are a number of countries, which no doubt are paying close attention to what may develop. Some to join and some to try and spoil the party. However this plays out, such shifts will not be smooth or pleasant as the effects are global and will resonate throughout all financial systems, especially within the United States. It is no secret that the central banks in China, Russia, Turkey, India and some other nations have been steadily increasing their physical gold holdings, as well as repatriating their bullion from the United States, for example Germany, and Turkey just recently this past April. There are persistent and growing unconfirmed rumors here in Moscow that both Russia and China have formulated or are outlining plans to launch some form of a gold-participatory currency system to replace the greenback as the world’s dominant currency. Whether it will be a Ruble or a Yuan, or something entirely different is still unclear, but something interesting is no doubt afoot within this fog of speculation.. That being said I have no idea how such a system might actually look, it’s organizational profile, how it would be regulated, standardized and traded, or whether it would be a basket of hard assets (gold, silver, energy) securing it, or only gold. The key attractor for the financial world which has traditionally parked its funds in US Dollar government bonds, is if an alternative currency system is governmentally supported, asset backed and interest bearing, then the appeal of that added value and security should make such an alternative realistically appealing. It may be the single key factor which will allow any chances for real competitive use against the Dollar, Yen, Renmimbi or Euro, all of which are fiat. Backing currencies today exclusively with gold is highly unlikely; however, there is realistic potential for a new form of currency possibly connected with a state regulated blockchain crypto-currency concept, or the partial exchange within such a currency system for gold as its referenced anchor. These do have possibilities and can occur without unduly testing credulity or imagination. The trend towards de-dollarization is happening, of that there is little doubt. Equally true is the fact that today this is just an irritant to the US government and the Federal Reserve. If implemented, it will in time erode capabilities the US can bring to bear economically, militarily and politically to all corners of the world through global financing of its dollar debt. That would be more than just an irritating for the US. No major country currently backs its currency with gold, but many have in the past, including the US. The US effectively abandoned the gold standard nationally in 1933, silver in 1968, and completely severed any linkage between the US dollar and gold internationally in 1971. The US since then has remained a fiat money system, meaning the dollar’s value is not linked to any independently redeemable asset other than faith in the US government. Looking back, the inflection point for the US to begin dollar de-linkage from gold and similar assets was to help combat the Great Depression. Faced with mounting unemployment and spiraling deflation in the early 1930s, the U.S. government found it could do little to stimulate the economy. To deter people from cashing in deposits and depleting the gold supply, the US and other governments had to keep interest rates high, but that made it too expensive for people and businesses to borrow. Therefore, in 1933, FDR cut the dollar’s ties with gold nationally, allowing the government to print (“QE”) dollars into the economy, thereby lowering interest rates. The U.S. continued to allow only foreign governments to exchange dollars for gold until 1971, when President Nixon abruptly ended the practice. It is worth noting that that before delinking from gold, the dollar had a fixed value reference of $35 to an ounce of gold, which limited and severely constrained financial and political policies. The value of gold was not permitted to be set by an open free market. Only after the dollar delinked from gold was the metal allowed to be openly traded as a commodity, at that time notably via the London Fix, and New York COMEX. It is unlikely that a fully gold-backed currency mechanism will emerge onto the world financial markets as it was before 1933, especially in this interconnected economic and information age. However, a basket of hard assets as a reference point or linkage anchor to currencies does have traction, and may very well be what is now being discussed between China and Russia. This especially as the market can and will establish relative values indexed to the assets comprising such a basket, and not be limited to a single fixed price. This also suggests that some control may shift away from the central banks and instead become market sensitized and responsive. This can be a frightening concept, as it is a distinct departure from today’s Fed practices, requiring significant political, procedural and audit realignments. Russia and China have been in working discussions to introduce gold-backed futures and similar mechanisms to circumvent the U.S dollar. It could be that over the next few decades we may witness the demise of fiat currencies such as the US Dollar, Yen, Euro and the debt excesses the printing of non-asset backed money has encouraged. Currently, with geopolitical pressures, sanctions and trade tariffs increasing against Russia and China, these two countries have come to be seen as the standard bearers or ‘white knights’ for de-dollarizing global free trade. Whether they want this role foisted on them or not. This view is growing within a number of countries who have been limited and constrained from development by the dominant default role of the US Dollar, and by extension the US Government in its follow-on ability to dictate policies and put pressure on their sovereign national affairs. The creation and introduction of a gold-inclusive indexed currency mechanism appears to be a likely event, perhaps sooner than we think. Russia has openly said that its national interests can be best served by reducing its exposure to the vulnerabilities and volatilities of global geopolitics by reducing the role of the greenback in its economic affairs. Moscow and Beijing have been actively reducing their dependence on the dollar in mutual and regional trade. In October 2017, China launched a PVP payment system for transactions in yuan and Russian rubles. This means that payments for Russian oil deliveries to China, which have reached 60 million metric tons per year and continue to increase, are now working without the US Dollar as intermediary. This also has the added benefit to allow confidentiality of transactions. This is not possible if the US Dollar is used as the medium for trade as currently all such transaction details have to be cleared, therefore known in New York. China’s launch of its own oil futures on the Shanghai International Energy Exchange plays a de-dollarization role and supports the gold-asset function as well. Today, shifting the China oil trade out of dollars into yuan takes between $600 billion and $800 billion worth of transactions out of the dollar each year. One of the several factors supporting the creation of a Russia/China gold related currency system is that just the other day the global debt has reached $237 trillion. The IMF warned this past week that the debt burden of the global economy is deeper today than it was before the financial crisis of 2008. The latest numbers for global debt is $237 trillion, up from the $140 trillion before the 2008 financial crisis. It is also worth noting that according to the Bank for International Settlements (BIS), there is also approximately $750 trillion in additional debt outstanding in derivatives, much of which is formally still “on the books” but practically can be considered swept under the financial rug, at least for now. The US Treasury Department on May 1st said the government borrowed a record $488 billion in the January-March quarter. This exceeds the old record of $483 billion set in the first quarter of 2010, when all stops were pulled to prop up the financial system. The US Treasury continues to face the growing need to finance government operations when annual deficits are heading to new record levels. Global debt has increased by roughly $21 trillion in 2017 alone. That is roughly the equivalent of this year’s US national debt. This has led to a forward-looking undercurrent of anxiety in the world’s markets, and a growing desire by some countries to do something to pre-empt being terminally caught up in these increasingly uncertain, predominantly dollar denominated risks. The latest sanctions against Russian oligarchs and their companies, as well as trade tariffs against China are also having unintended consequences. Rusal is a major aluminum producer. They provide an estimated 6% of the world’s supply. Companies are now scampering every which way to secure new supply sources because the Russian supply has been cut off by US sanctions. The sanctions caused both the Russian stock market and the Russian Ruble to fall sharply and sent aluminum prices soaring. This simply underscores the need to create alternatives to the US Dollar sooner rather than later. Unintended consequences do not stop with sanctions against Russian companies. The dollarized trade war between China and the U.S. is also enjoying its moments in the sun. After the US imposed tariffs on China that hit aluminum products, robotics, aircraft parts, vaccines, dishwashing machines and many other items, the Chinese retaliated in turn with tariffs that hit soybeans, cars, and chemical products among others. China’s response negatively affected agriculture products notably from the very same agricultural states that backed Trump. Aircraft parts and engines were a top U.S. export to China, totaling some $16.3 billion. Soybeans are a top agriculture product with $12.4 billion exported to China every year. As this evolves, we should be seeing inflation in the US and elsewhere rather higher than the Fed’s “2% sweet spot”, in fact it may unpleasantly surprise us all. Keeping in mind when loans are made in dollars, the debtor is then essentially a hostage, having to agree to the issuing central banks’ policies. The central bank determines the price of those dollars through politically guided monetary policy, and its (fiat) value thanks to currency printing. If such loans were issued in gold or asset-backed instruments, such counterparty pressures would lessen, or no longer be a feature. China for many years has made it clear that gold purchased in China is to remain in China. Russia, Turkey and recently India are of the same conviction. This allows for each of these nations to be the secure custodian and guarantor of their gold assets, reducing the risk of politically motivated seizure as can happen with currencies and debt instruments. Decisions have been acted on already by several countries repatriating their gold from the US. This is a telling sign that US control and influence is starting to shift, along with trust that had allowed the US to play a custodial role over foreign reserves for so long. Russia, Turkey and China are countries that are increasingly seen as threats by the West, in one form or another, and are rocking the currency boat. Various measures have been taken against them to make international trade and negotiations onerous at best. Whether through fear mongering, sanctions or trade tariffs, countries are feeling the force and weight of the US and its allies’ powers. As a result, they are increasingly considering re-enlisting gold and perhaps a basket of similar assets to shield themselves protect their financial reserves, and their ability to function as economically viable independent sovereign nations. The process has begun, where it may take us over the coming years is the big question and one that will redefine international trade and geopolitics for decades to come. While today this possibility is still in the realm of market hearsay, rumors, and fake news – but in this increasingly curious age what isn’t?
loganair
19/4/2018
11:18
The cheapest bet on rising oil prices by John Stepek: Who’ll be a winner if oil prices remain high? So let’s assume that oil continues its winning streak. What might that mean? Higher oil prices are increasingly priced into most of the relevant markets, I feel – energy stocks aren’t expensive by any means, but they aren’t as cheap as they were. But if you are interested in investing in Russia, then it’s probably the cheapest oil-dependent play around right now (indeed, unless you can find a small-cap firm that has fallen on hard times and is just around the corner from a massive oil strike, Russia is almost certainly the cheapest play on oil right now). I’m still not keen to invest there, but you could argue that I’m going against my own logic of investing when markets are cheap (and you would almost certainly be right). So if you’re looking for a cheap play on oil (even at prices that are lower than today’s), then Russia’s probably the best bet.
loganair
17/4/2018
11:26
Baring Emerging Europe manager Matthias Siller is standing by his 64% allocation to Russian equities, following a challenging week for the country’s stock market. Siller believes the investment rationale for holding Russian companies remains intact - even if the country’s economic recovery is likely to be subdued by tough sanctions were introduced by the US this month. When you throw in rising tensions between Russia and the UK following the poisoning of a former Russian spy and his daughter in Salisbury, as well as Russia and the US locking horns over Syria, it’s easy to see why investors such as our columnist Ian Cowie have been spooked. ‘From our perspective, we distinguish between political implications and the economic situation on the ground in Russia. If you look at the political implications, of course we hope this does not become a “hot war” in Syria, but we do believe it is prudent to apply an elevated risk premium to Russia,’ Siller explained. While the sanctions and growing geopolitical tensions represent bad news, Siller says the prospects for Russia should not be written off altogether. This is because a number of positive dynamics are at work in the Russian market and Siller (pictured) believes these have been under-appreciated by investors. Firstly, he points to improving corporate governance standards across both private and state-owned enterprises. This is demonstrated by the growing dividend payout ratio in Russia. While Russian businesses had previously lagged other emerging markets in terms of distributing income to shareholders, Siller says this has changed over the past four to five years. On average Russian companies distribute more than a third of their net income as dividends. Looking ahead, he expects higher earnings growth will translate into dividend growth. ‘Russia is setting standards for emerging market companies rather than lagging them. So far, this has not been fully appreciated by the market and continues to surprise investors positively,’ the fund manager said. Two sides to the story: Although the Russian market sold off sharply after the sanctions were announced, Siller described it as an ‘orderly retreat’. ‘In other words it was not a widespread panic. The market has distinguished correctly between exporters and domestically-oriented companies,’ Siller added. This has led to a bifurcation in the market. On the one hand, companies that are sensitive to the domestic economy have seen their share prices come under pressure as a result of a weaker rouble. However, it has been a different story for exporters, which stand to benefit from currency weakness. Siller says oil exporters, in particular, can benefit from two factors: a weakening currency which ultimately lowers their costs, and a higher oil price which boosts their margins. On the positive side, Siller notes that higher market volatility – which he expects will continue – is going to present stockpickers with investment opportunities over time. Sberbank represents the trust’s largest position, followed by energy company Lukoil and gas producer Novatek.
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