Jpmorgan Russian Securit... Investors - JRS

Jpmorgan Russian Securit... Investors - JRS

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Stock Name Stock Symbol Market Stock Type Stock ISIN Stock Description
Jpmorgan Russian Securities Plc JRS London Ordinary Share GB0032164732 ORD 1P
  Price Change Price Change % Stock Price Last Trade
-7.00 -1.09% 637.00 16:35:03
Open Price Low Price High Price Close Price Previous Close
638.00 630.00 638.00 637.00 644.00
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loganair: Jim Rogers bullish on Russia thanks to ‘lots of oil & agriculture': There are bubbles developing in stock and bond markets, according to legendary investor Jim Rogers. However, he says he is very optimistic on agriculture as a commodity and also likes equities in Japan and Russia. “Yes, bubbles are beginning to develop. We do not have full-fledged bubbles yet except in bonds, bonds everywhere are a full-fledged bubble,” Rogers said in an interview with India’s Economic Times. “At the moment, if I will buy countries, I would buy Japan, I would buy Russia; both are still down dramatically but lots of money is going to pour into both of them because they are cheap and likewise agriculture. I am not buying America; America is at an all-time high. So, Japan, Russia, agriculture.” Talking about crude, Rogers said, it’s at the highest it has been in years, with the production and the reserves going down. “The bubble popped in fracking and now people realize, oh my gosh, world supplies are declining. At the end, I am buying Russia because Russia is depressed and Russia has a lot of oil and a lot of agriculture.” He also said: “We are going to have much higher prices of food, fuel and nearly all commodities. The single cheapest asset is steel commodities. Bonds are a bubble as we discussed, a bubble is developing in stock exchanges also. Commodities are still very cheap on a historic basis, silver is still down 45 percent from the all-time high.”
loganair: hs - It seems to me most Private Retail Investors are too fearful about investing in Russia whereas for me, investing in Russian stocks, not just JRS, other Russian stocks quoted on the LSE have been one of my best investments over the past 20 years with the icing on the cake being a very good dividend yield on my original investment in JRS.
loganair: While the global economy is trying to stay afloat amid the Covid-19 pandemic, investors should look to emerging markets like Russia and India, as well as at physical gold. That’s the advice from veteran investor Mark Mobius. Mobius said he sees a lot of opportunities in emerging markets, mainly Russia and India. He added that Brazil, South Africa, South Korea, Taiwan and even Turkey also provide good investments. “Russia is a very interesting market, many people invest in Russia,” he said, noting positive changes taking place on the country’s market. The founding partner of Mobius Capital Partners said he is also very bullish on gold and knows many investors with 10-15 percent of their portfolios in physical gold. Gold bullion won’t lose its value with time, like the US dollar did, he said. According to Mobius, equities are the number one investment asset that protects against devaluation. Commodities are also good.
loganair: Rising oil prices put Russia back in profit: Oil prices have recovered remarkably fast after the OPEC++ deal was agreed, to break above $40 to the barrel again, back into the Kremlin’s “comfort zone,” according to the Finance Ministry. Russia Inc is back in profit with $40 oil, which is how much a barrel needs to cost for the budget to break even. In addition, at $42 per barrel Russia will start accumulating money in its reserve fund, the National Welfare Fund (NWF), as under the so-called budget rule, any oil tax revenues earned from oil prices over $42.4 has to be paid into the NWF. The NWF is there to cover any budget deficit in a crisis, and the Finance Ministry was intending to tap the fund, which held 12 trillion rubles ($174 billion) as of the start of March, to cover an anticipated deficit of 3 trillion rubles this year. The reserves fell to 9 trillion rubles in May after the Ministry of Finance used part of the funds to buy a stake in Sberbank, the biggest bank in Russia, from the CBR – a backdoor route to give the CBR a war chest of cash it could use to defend the ruble if needed – but still leaving at least three years’ worth of cash in the fund to cover a budget deficit. Still a crisis price to pay: That is not to say this crisis is not going to be painful and that the government is not going to have to spend heavily to get Russia Inc back to work. Rosstat reported this week that the basic sectors – a good proxy for GDP – were down by 10 percent year-on-year in April and that the consumer-orientated sectors are all down by at least a third. Last week Prime Minister Mikhail Mishustin unveiled the latest version of the National Plan for Economic Recovery (NPER), which calls for some 5 trillion rubles ($72.8 billion) of spending, or 7.8 percent of GDP. However, much of this money is simply funds that were already committed under the current budget to pay for the 12 national projects and is now going to be re-tasked to stimulate the economy or support the social sector: The bottom line is the 2 percent of GDP budget surplus will disappear and the government will run a 0.5 percent of GDP deficit, plus the Ministry of Finance intends to borrow an extra 2 trillion rubles ($29 billion) from the domestic bond market on top of the 2 trillion rubles already pencilled into the current budget, to help pay for the NPER. Again, that means the reserves will remain a last line of defence, and if Russia continues its rebound there is a good chance that the Kremlin will end this year with even more cash in reserve than it has now. Russian rebound underway, safe haven for investors: The economic rebound in Russia is already visible after the ruble has clawed back much of the ground it lost in the last two months against the dollar. At the same time, if there is a deficit this year the ministry also now has the option of financing it by issuing Russian Ministry of Finance ruble-denominated OFZ treasury bills, which are increasingly seen as a safe haven by international investors thanks to Russia’s rock solid finances. Indeed, over a third of the foreign investors in the OFZ are from the US, where the bonds have proven to be a popular investment with institutional investors like insurance companies and pension funds.
loganair: The appointment of a new prime minister has boosted the Russian stock market to new record highs today, with the national currency holding on to gains reached over the past 18 months. The ruble continued gaining against major currencies on Friday, after accelerating growth on the news of the appointment of Mikhail Mishustin as Russia's new prime minister earlier in the week. Analysts credit a positive market reaction to the changes in the Russian government."The government's likely focus on investment should support yields and the ruble's carry attractiveness," Sébastien Barbé, head of emerging market research at Credit Agricole said. "Once the ruble stabilizes, investors may feel the timing is right to add to the ruble carry trade," he added.
loganair: While last year was marked by political and economic uncertainty across the world, Greece, Russia and Italy have been Europe’s top performing stock markets. Some investors dismissed these markets as “too dangerous, too politically unstable, too reliant on commodities, too weak economically or a combination of all four,” Russ Mould, investment director at AJ Bell said in a note to clients.“But this just goes to show that buying what is comfortable is rarely the route to big profits,” he added. Last year was good for Russian stocks. The country’s major MOEX Russia Index was up by 29 percent. According to Mould, “Russia emerged from a recession, helped by interest rate cuts and the carefully crafted policies of its respected central bank head, Elvira Nabiullina.”
loganair: The Russian stock market has delivered the biggest returns to investors around the world this year. Global rate cuts and increased dividend payouts have been driving investor interest in Russia. The MSCI Russia Index which tracks the 23 largest Russian publicly-listed companies has surged 44 percent since the start of the year, according to Sberbank analyst Cole Akeson. That is almost four times the returns of the MSCI Emerging Markets Index which includes Russian stocks and companies listed in 23 other developing economies such as China, Brazil, Mexico and India, the analyst told business news outlet RBC. The stock market’s current surge has been driven by higher global risk appetite and a search for higher-paying assets amid interest rate cuts, said Mikhail Ganelin, senior analyst at Aton. He explained that it has benefited Russian stocks, which are seen as riskier and have lower levels of liquidity. Russian companies increased their dividend payouts in 2019, which was one of the reasons of the MSCI index’s growth. The dividend yield on the Russian market is among the highest in the world at 6.7 percent, compared to just two percent on the S&P 500. Last week, the MOEX Russia Index set a new record high, passing 3,000 points for the first time in its history. The index comprised of shares of more than 50 major Russian companies, including Sberbank, Gazprom and Rosneft, has risen by more than 30 percent over the last 12 months.
loganair: Russia has been among the best-performing equity markets globally, despite being out of favour with international investors. The RTS Index has climbed above its 2014 pre-Crimea levels, before sanctions were imposed. Although economic growth has disappointed in 2019, earnings and dividend pay-out ratios continue to grow. At a trailing price-earnings (P/E) ratio of just 6x, the Russian market remains extremely cheap. JRS’s underlying portfolio has a 7% dividend yield, according to its longstanding manager, Oleg Biryulyov. He adds that the Russian market is showing signs of becoming less sensitive to movements in energy prices. Manager’s view: Russian stocks were among the strongest performers globally over the first half of the year; when QuotedData’s analyst met Oleg in mid-June, he said that only the relatively illiquid Greek market had performed better. The RTS Index has climbed above its pre-Crimea 2014 levels (before sanctions were imposed), though the Index remains well below its pre-2008 level. Oleg says this strong-returns environment has coincided with a period of relatively low interest from foreign investors. Perhaps reflecting a mix of factors, including tempered interest in Russia post 2014 as international investors largely remained on the side-lines, local Russian investors have become bigger participants in the market. The sanctions created an environment where, as prices fell, many fundamentally sound businesses traded at very high dividend yields. Oleg told us that yield on JRS’s portfolio was approaching 7%. Earnings and pay-out ratios continue to grow. This is a major recurring theme – Oleg says that the team are seeing it in almost all company presentations and reports. Economic growth has disappointed in 2019: As important as oil is to Russia, Oleg says that in terms of the stock market, there has been evidence of equities becoming less sensitive to movements in energy prices. Despite the strong leg-up in oil prices at the start of the year (oil prices have since come down), the price level remains lower than a year ago. Over the same period, the rouble has strengthened against the US dollar (it has appreciated by 5.8% over the year-to-date) and the RTS Index has increased by 21.8%. Political relations between Russia and the West have proven to be relatively benign over recent months, as the spotlight has shifted to the US and China’s trade dispute. This has allowed Russian assets to largely move forward relatively unencumbered by events elsewhere. However, at the macroeconomic level, the performance of the economy has disappointed over recent months. Russia only returned to positive economic growth in 2017 and, after an encouraging 2018, real (inflation-adjusted) GDP growth might have been expected to register more than the 0.5% recorded over the first quarter of 2019. An increase in the rate of VAT has dampened spending by households, many of which continue to feel the effects from five successive years of declining real incomes. Deflation in food prices (food accounts for around 40% of most household budgets) has provided some respite to consumers, although, as we discuss later, this continues to be unhelpful to the food retail sector. Employment levels have bounced back strongly since the nadir of early 2016, with data reported by the Federal State Statistics Service showing an unemployment rate of 4.5% for July 2019. The figure was a slight drop from mid-2018, which aligns with the view that the economy has lost some momentum. With inflation at 4.6% in July (low against long-term averages but more than 2% higher than last year), the central bank has some room to trim interest rates to try and restore momentum to the economy – a recent 0.25% cut has reduced the interest rate to 7.25%. It seems plausible that rates are likely to be trimmed by at least another 0.25% before the end of the year. That said, it is unlikely that domestic demand-focused companies will drive returns for JRS over the next 12 months; export-oriented businesses are expected to carry the baton. Russia’s food retailing sector, led by Magnit and X5, was one of, if not the fastest-growing in the world a few years back. Over recent times, Oleg says that the sector has been heavily affected by food price deflation and the declines in real incomes. Oleg says that over the past three years it has been a priority of the government to rebuild foreign reserves, which it has succeeded in doing – they are over $500bn – they were under $400bn two years ago. Oleg also added that for the participation of domestic institutional investors to increase markedly, the equity market needs to evolve beyond a predominant bias to energy-related companies and dividend plays. Structural discount persists: Even accounting for the stock market’s strong recent performance, it remains at a structural discount to most peers. Oleg says that high-dividend yields have effectively acted as price floor for many companies; a lot of fundamentally sound companies have traded at high yields. The trailing price/earnings ratio for the Russian market stands at about 5.5x, is a substantial discount to global equities. Oleg says that Russia’s long-standing structural valuation discount, specifically to many emerging markets, reflects factors such as its concentrated exposure to the oil and gas sector. In his view, Russia has not developed enough consumer-focused companies, particularly in the technology sector. That said, Oleg adds that it is harder to explain the relative ‘cheapnessR17; of the commodities companies. We note that Gazprom trades at a trailing price/earnings ratio of 3.1x, as at 9 September 2019. The discounts applied to the commodities companies could reflect concerns over corporate governance standards and political interference. Investment process: The manager seeks to identify attractively-valued companies with sustainable above-average returns. The investment approach for JRS is based on JPMorgan’s emerging market investment process. JPMAM’s global team is responsible for producing a macroeconomic outlook for each country and region. JPMAM also has a large team of researchers that is looking at companies on a sector basis across all regions of emerging markets. Over 20 of the team are involved in research on Europe, the Middle East and Africa (EMEA) stocks. They help maintain JPMAM’s comprehensive in-house research database. Oleg, in addition to being the lead manager on JRS, is head of EMEA within JPMAM. Oleg visits Russia at least once a year but he also sees many companies when their representatives come to London. He says that accounting accords with international standards and he thinks that corporate governance has improved, in general. JPMAM analysts submit ideas for Oleg’s approval and he has final say over what goes into the portfolio. The analyst reports review each stock in great detail, looking at a range of measures including return on equity (ROE), which they want to be sustainable – this includes an assessment of how capital intensive the business is; cash generation; the strength of the balance sheet; and how sensitive the company is to inflation. They will also examine the durability of the company’s business, corporate governance standards and ESG (environmental, social and corporate governance) attributes. Oleg wants to hold companies that look attractive across a range of factors. Returns are derived from earnings growth and dividends, which are within the control of the company, and valuation multiple changes and currency moves, which come from changes in market sentiment. JPMAM prefers companies that it believes can benefit from each of these. Stocks are assessed for inclusion within the portfolio on the basis of predicted returns. The predicted return is derived from a predicted exit price/earnings ratio and an internal forecast of returns over the next five years (returns are expected to normalise after year three). Oleg breaks down the portfolio into ‘trading’; stocks that he will move in and out of on valuation grounds, ‘quality’; stocks that will form the core of the portfolio as long-term holdings, and ‘premium’; stocks – the crème de la crème. Turnover works out to about 25% to 35% per annum.
loganair: Russia plans to issue its first yuan-denominated bond. The yuan bonds are expected to be issued by the end of the year or early next year, marking the first time that Russia issues its sovereign debt in the Chinese currency, officially called renminbi. While the two trade partners have been planning the move since 2016, it has been postponed several times. While Moscow currently has enough foreign investors ready to buy government bonds, it is still interested in extending its list of foreign creditors. As Chinese investors do not buy Russia’s ruble-denominated bonds, the launch of the yuan bonds would give them an opportunity to invest in Russian state debt. However, the new bond in the Chinese currency will not change anything in the short-term, but rather will have a long term impact, as it “lays the groundwork” for future investment, Anton Bakhtin, investment strategist with Premier BCS, explained.
loganair: Russian companies’ stocks attracted the most foreign investment in 5 years, adding nearly $576 million in January, the Central Bank of Russia reported. Investors also actively poured money into Russian bonds despite US sanctions. The ruble-based Moscow stock exchange (MOEX) index has reached a new all-time high, surging 6.4 percent since the beginning of the year, the regulator said in its report on liquidity of the banking sector and the financial markets issued on Tuesday. The index hit several records in January, finishing the month at 2536.28 points, and later reached a new all-time high of 2551.97 points on February 6. At the same time the dollar-dominated MSCI Russia Index rose 13.2 percent reaching the figures of April 2018, when harsh anti-Russian sanction were introduced by the US. The Russian state bond market (OFZ) also attracted foreign investors. Non-residents expanded their investment into Russian bonds by $837 million, the highest figure since January 2018. Half of them were purchased at auctions, while the other half at secondary market, where the inflow of foreign investment has been recorded for the first time in a year, according to the central bank. “In January the situation in the Russian financial market significantly improved due to the growth of global demand for risky assets,” the regulator explained in the report. It added that softening of the US Federal Reserve’s rhetoric on monetary policy, as well as the progress in US-China trade talks and the rise of oil prices back to $60 per barrel positively affected investors’ sentiment. Last year, Russia made a top 5 list of Europe’s most attractive destinations for foreign investments, according to the data published by professional services firm EY.
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