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[loganair] 27/9/2017 11:33

The Russian Central Bank announced last week that its gold reserves had reached 56.1 million troy ounces (approximately 1,745 metric tons). The total included an additional 500,000 ounces (approximately 15.5 metric tons) of gold added in August while the Turkish central bank bought 6 tonnes.

Year to date, the Russian Central Bank has added over 4.2 million ounces or approximately 131 tons of gold to reserves.

In addition to increasing its gold hoard, Russia’s overall foreign reserves have grown from $371 billion in January 2016 to $424 billion as at August 31, 2017.

The current pace of Russia’s gold purchases in 2017, puts it on track to add more than 200 tons of gold. Through August 2017, the Russian Central Bank has added 4.2 million ounces of gold to reserves compared to 3.6 million ounces of gold added through the the same time periods of 2015 and 2016.

As of August 31 2017, gold constituted about 17.3% of the Central Bank of Russia’s $424 billion reserves with her gold hoard valued at approximately $73.5 billion, up from $52 billion or 12% of overall reserves as at August 31, 2016.

n January 2014, Russia’s U.S. Treasury position was $131 billion. In reaction to U.S. inspired sanctions being placed on her, Russia sold a substantial portion of her U.S. Treasury holdings. Russian U.S. Treasury holdings reached a low of $66.5 billion in April 2015. Since then Russia has added back a a large portion of its U.S. Treasury holdings. As of July 2017, Russia held $103.2 billion in U.S. Treasury Securities.

By retaining a large percentage of its gold mining output the Central Bank of Russia has been in effect converting Roubles into gold.

[loganair] 27/9/2017 11:33

The Russian Central Bank announced last week that its gold reserves had reached 56.1 million troy ounces (approximately 1,745 metric tons). The total included an additional 500,000 ounces (approximately 15.5 metric tons) of gold added in August while the Turkish central bank bought 6 tonnes.

Year to date, the Russian Central Bank has added over 4.2 million ounces or approximately 131 tons of gold to reserves.

In addition to increasing its gold hoard, Russia’s overall foreign reserves have grown from $371 billion in January 2016 to $424 billion as at August 31, 2017.

The current pace of Russia’s gold purchases in 2017, puts it on track to add more than 200 tons of gold. Through August 2017, the Russian Central Bank has added 4.2 million ounces of gold to reserves compared to 3.6 million ounces of gold added through the the same time periods of 2015 and 2016.

As of August 31 2017, gold constituted about 17.3% of the Central Bank of Russia’s $424 billion reserves with her gold hoard valued at approximately $73.5 billion, up from $52 billion or 12% of overall reserves as at August 31, 2016.

n January 2014, Russia’s U.S. Treasury position was $131 billion. In reaction to U.S. inspired sanctions being placed on her, Russia sold a substantial portion of her U.S. Treasury holdings. Russian U.S. Treasury holdings reached a low of $66.5 billion in April 2015. Since then Russia has added back a a large portion of its U.S. Treasury holdings. As of July 2017, Russia held $103.2 billion in U.S. Treasury Securities.

By retaining a large percentage of its gold mining output the Central Bank of Russia has been in effect converting Roubles into gold.

[hazl] 22/9/2017 22:28

587 very interesting logonair thanks.

[loganair] 22/9/2017 20:31

“The government, the Bank of Russia and commercial banks can purchase gold VAT free. But individual and institutional purchases of gold bars are subject to VAT of 18% – the highest rate in the world.” leaving private investment exceptionally low, totaling just four tonnes last year

However, things could change for the better in the near future, especially with the latest submission of the draft amendment to the tax code by the Russian government.

Deputy Finance Minister Aleksey Moiseev said he hoped the changes could be implemented by the end of 2017 to remove VAT from private gold purchases.

“The initiative will permit a sharp rise in the investment appeal of gold for Russians and increase their demand for physical gold”. Independent analysis also suggests that the abolition of VAT should boost retail demand for gold by around 50 tonnes per year in the long run, conferring material benefits on the wider economy.

The WGC (World gold Council) views the move a significant step forward. “In our view, opening up the domestic gold investment market could make a material difference to the Russian economy, the gold industry and the country’s position on the global gold stage.”

[loganair] 22/9/2017 07:51

A quick update on Russia's FX reserves, they now stand at $424bln, up $29bln over the past 12 months.

Gold now makes up $73.5bln of Russia's FX reserves, up $9bln over the past 12 months.

[loganair] 18/9/2017 18:02

Russia lowers interest rate for fourth time in 2017:

Russia's central bank has cut its key interest rate again as inflation hits a record low.

Russia's central bank announced Friday it had cut its key interest rate to 8.5 percent, marking the fourth reduction this year amid low inflation.

The lender said it took the decision to slice 50 points off the rate after "inflation expectations resumed their decline."

In a statement, the bank noted it would continue to conduct a moderately tight monetary policy in order to maintain inflation close to 4 percent.

it also said that "during the next two quarters, the Bank of Russia deems it possible to cut the key rate further."

The bank dramatically increased its interest rates following the crash of the ruble in late 2014 and has been gradually chipping away at the key rate since then in bid to bolster the economy.

After three consecutive cuts, the bank chose to not to lower them further during its last meeting in July due to a worries over inflation.

But those fears proved unfounded and inflation in August fell to a post-Soviet low of 3.3 percent.

Russia's gross domestic product (GDP) is expected to expand by between 1.7 percent and 2.2 percent this year, according to central bank estimates.

The lender warned, though, that the national economy required serious structural reforms to grow more strongly in the future.

[loganair] 02/9/2017 19:11

Emerging markets will start to dominate rankings of the world's top economies by 2030, according to a report published earlier this year.

The report, published by PricewaterhouseCoopers, finds that emerging markets such as India and Brazil will increasingly challenge the economic dominance of the USA and China, while others slip behind.



The UK will fall to 10th place while Brazil will be at 8th, Russia 6th, Germany 5th, Japan 4th, India 3rd, USA 2nd and China 1st.

[loganair] 22/7/2017 08:09

Russian central bank says inflation slowdown will enable it to cut rates:

Russian inflation becoming anchored at the target level and inflation expectations stabilizing will open the door for the central bank to cut interest rates more, it said in a financial review on Friday.

Consumer inflation in Russia unexpectedly accelerated to 4.4 percent in June, challenging the central bank's aim of bringing inflation up to 4 percent this year.

Despite the latest pickup, the central bank may still reach its target as core inflation, which excludes prices for food, fuel and utility tariffs, slowed to 3.5 percent in June, analysts have said.

[loganair] 17/7/2017 21:39

Russian energy major Gazprom (JRS 2nd Largest Investment) has increased gas exports to Europe and Turkey to 102.9 billion cubic meters since the beginning of the year, marking a 12.3 percent increase from the same period a year ago.

In particular, gas exports to Germany are up 16.7 percent. Austria saw a 77.2 percent rise in gas supplies from Russia, while the Czech Republic increased imports of Russian gas by 24.8 percent and Slovakia by 25.8 percent.

The Nord Stream-2 pipeline aims to double the existing capacity delivering natural gas to Germany and Northern Europe under the Baltic Sea.

Turkish Stream, designed as a two-branch pipeline, is a project with Turkey’s state-owned BOTAS. The first pipeline with a maximum capacity of 15.75 billion cubic meters is expected to be finished in 2018 and deliver Russian natural gas directly to Turkey. The second branch is expected to provide gas to customers in southern Europe through Turkey.

[loganair] 14/7/2017 08:14

The Russian economy is now at the beginning of a new growth cycle, said Elvira Nabiullina, head the Central Bank of Russia.

She made the remarks at the International Financial Congress in St. Petersburg on Thursday.

She said the Russian economy has returned to low, but positive growth rates, the growth by 1.3 to 1.8 percent is expected in 2017.

However, the country needs structural reforms that can make economic development more sustainable, she said.

Nabiullina added that the Central Bank of Russia plans not to reduce the inflation of Russian ruble, but to control it for the next five years in order to maintain financial stability.

[loganair] 23/6/2017 09:42

Russia's central bank, which is seeking to its international reserves, posted an increase in gold reserves in May, the fifth consecutive month of gains.

The central bank, one of the world's largest holders of bullion, has been regularly buying gold as it wrestles with weaker oil prices and Western sanctions imposed over Moscow's role in the Ukraine crisis.

Russian gold reserves increased by some 700,000 ounces (21.8 tonnes) bringing the grand total of its reported gold reserves to around 1,708 tonnes.

Russia's gold reserves rose to 54.9 million troy ounces by early June from 54.2 million ounces as of May 1, the central bank said on Tuesday.

The value of its holdings rose to $69.30 billion from $68.65 billion as of May 1.

Russia's central bank, which usually buys locally produced gold from Russian banks, has been one of the leading national buyers of gold in recent years, along with China.

[loganair] 16/6/2017 10:45

The earnings season so far and the earnings outlook have been steadily improving, leaving market valuations looking attractive. With the dividends season just around the corner, we anticipate further demands by the Russian government from Gazprom and other State-controlled companies to make increased dividend payouts. The current dividend yield already makes Russia very attractive from an income point of view, and the increasing prevalence of higher payouts could give a major boost to the investment multiple of the market.

The Board of JRS has noted that more than three quarters of the Company's dividend income is received between the months of July and October. The Board considers that it would be appropriate to distribute the large majority of this income to shareholders by way of interim dividend payable in October rather than retaining this for later distribution. The Company's interim dividend, which is expected to be considered by the Board for declaration in September 2017, is therefore 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 AGM for payment in March. The Board expects to comment further on this evolution of dividend policy following consideration of the interim dividend in September.



During the period the discount ranged between 11.2% and 17.7%. The Board's Discount Policy is to consider the buyback of shares when the Company's discount is above 10%, taking into account the absolute level of the Company's discount and the relative level of discount amongst peers in emerging markets.

After regular and careful consideration of the policy, the Board refrained from buying back shares in the period under review. The Board considered that the uncertainty surrounding Russia's economic and geopolitical situation, together with the high average discounts for emerging market investments, meant that buybacks would be ineffective in providing any meaningful narrowing of the Company's discount, other than possibly a very short term effect.


Outlook:

The valuation story has recently been supported by dividends and some recovery both in commodities and the rouble. There are no changes to the long-term story for Russian equities. The country's risk profile has been volatile and unpredictable, but returns have been reasonably good for portfolio investors. We would welcome new issuance and better market diversification, but we are under no illusions that this will happen quickly.

We expect positive earnings revisions to continue into the second and third quarters of 2017, providing ongoing support to the Russian equity market.

[loganair] 07/6/2017 11:26

Analysts and company officials say investors may now be warming to Russia amid a nascent economic recovery.

"The economic backdrop has improved tremendously over the last 12 months, " said James Friel, Global Head of Investment Banking at Renaissance Capital. "Russia is seen as less toxic now."

[loganair] 02/6/2017 09:09

Learning from the past:

While the revival of emerging markets is certainly good news for active investors, this is not merely a valuation anomaly play. Five long years of low growth have forced these economies to employ longer-term strategic initiatives to improve their business climates.

“You are seeing better corporate governance, the reducing of current account deficits and government reform programs across the board,” said Ewan of the Neptune Emerging Markets Fund. “The key overweights in the emerging market funds are in the economies that are pursuing pro-reform agendas, from Modi’s modernisation of India to Russia’s commitment to becoming a top 20 World Bank “Doing Business” economy by 2020.”

The Neptune Russia & Greater Russia Fund continues to benefit from its significant exposure to ‘New Russia’, in contrast to the energy and materials biases of the benchmark. This has contributed to the Fund’s significant outperformance versus the MSCI Russia Large Cap Index over a one and three year period.

While the Fund is less exposed to oil than the wider benchmark, the stabilisation of the oil price since the lows of early 2016 has been a big driver of the market over the past year. The current oil price is at something of a Goldilocks level for Russia. The rally through 2016 has reduced the stress on the budget, and the stronger ruble has helped anchor inflation, which should allow the Central Bank to continue to lower rates. We believe there is much more room for rates to come down in Russia than consensus, which in turn will boost economic growth above expectations. However, the government is very aware of the need to diversify the economy away from natural resources, and the oil price shock will help to drive reforms, which will again stimulate stronger economic growth in the medium term.

[loganair] 29/5/2017 10:00

Russian Economy Moves to Recovery from Recession, says the World Bank:

The Russian Federation is showing encouraging signs of overcoming the recession it entered in 2014. The economy is projected to grow 1.3% in 2017, and then 1.4% in both 2018 and 2019, according to the World Bank’s latest Russia Economic Report (no. 37 in the series) launched today in Moscow.

Growing macro-stability, driven by the government’s policy response package of a flexible exchange rate policy, expenditure cuts, and bank recapitalization – along with tapping into the Reserve Fund – has helped facilitate the adjustment of an economy hit by the double shocks of low oil prices and restricted access to international financial markets. The positive terms-of-trade effect from rising oil prices, coupled with more stable macroeconomic conditions, are expected to drive Russia’s economic recovery going forward.

“Macro stability and oil prices are the main factors driving this recovery,” said Apurva Sanghi, World Bank Lead Economist for the Russian Federation and the main author of the report. “Successful adherence to the 2017 – 2019 Budget Law will be key for laying the proper groundwork for the planned fiscal rule, which will subsequently reduce the sensitivity of the budget to oil prices and improve economic predictability”;.

Consumption is expected to drive growth in 2017-2019, with investment playing a supporting role, says the report. Headline inflation is expected to continue moderating, falling slightly below 4% at the end of 2017 and stabilizing at around 4% in 2018-2019. Lower inflation will support real wages, which will be the main source of real income growth. Along with these developments, improving consumer sentiments and better credit conditions are all expected to lead to a growth in private consumption of 1.8% in 2017 and 2.5% in both 2018 and 2019.

Investment demand is expected to increase in 2017-2019, due to a pick-up in fixed capital investment growth and a restocking of inventories, predominantly in 2017. Additionally, the 2018 FIFA World Cup – which will take place in Russia – could further support public investment.

The report emphasizes that the poverty rate is expected to decrease because of decelerated inflation and recoveries in household incomes and consumption: the poverty headcount is projected to decline from 13.5% in 2016 to 13% in 2017, and to continue declining to 12.3% and 11.6% in 2018 and 2019, respectively.

The special topic of the report examines how Russia’s regions fared during the crisis years of 2014-16. While they fared well as a whole, significant disparities and variations remain in the fiscal health of the regions. Moreover, the adverse effects of the crisis were averted by a strategy of significant expenditure cuts in the regions, which may have deleterious medium-term effects on regional productivity.

In that context, Russia’s regions have room to improve their fiscal buffers, by tapping more into the revenue side, raising select taxes and increasing yields of other taxes, for example. In the long run, a rebalancing of the division of revenues and functional responsibilities between the federal government and the regions may need to be considered.

Russia’s longer-term growth prospects, however, remain constrained by its low productivity.

“Boosting productivity growth remains key to achieving inclusive, sustainable and fast-paced growth in Russia,” said Andras Horvai, World Bank Country Director and Resident Representative in the Russian Federation. “While we already see the benefits of increasing macro-stability – not only through a return to growth, but also in declining poverty – addressing deeper structural issues related to demography and competitiveness would enable Russia to take full advantage of the positive momentum.”

[loganair] 17/5/2017 10:45

The UN have improved their outlook for the Russian economy, forecasting the 1.5-percent GDP growth in 2017 in their mid-year update of the World Economic Situation and Prospects 2017 report.

UN DESA also reviewed the results of 2016. According to new calculations, Russia’s GDP contracted by 0.2%, not by 0.8 as was previously estimated. As before, Russia is ranked among "economies in transition."

"Sanctions clearly have some impact, access to international finance has been restricted in the Russian Federation which has held back the recovery," said Holland, Senior Economic Affairs Officer, Global Economic Monitoring Unit, Development Policy and Analysis Division.

"We do see the economy recovering this year and one of the things behind that is that the shifts in the production structures which partly was a reaction to the sanctions, looking to replace imported goods with domestic production, and that has been quite successful in some sectors. So that is one of the factors behind the projection in the stronger growth this year," she went on. "So yes there are impacts, but they have been in place for an extended period of time now and the economy has started to sort of grow around them to accommodate those (sanctions)."

[loganair] 15/5/2017 10:14

Overall new car sales in Russia rose 6.9 percent to 129,476 last month as the market's rebound gathered momentum after four years of falling demand, according to data from the Association of European Businesses.

Shows retail confidence is starting to return in Russian.

[loganair] 08/5/2017 09:49

German businesses with offices in Russia are more concerned with economic problems than with the politics, Deutsche Wirtschafts Nachrichten wrote. Many companies demand the removal of anti-Russian sanctions as they negatively affect business relations between the countries.

In its publication, According to the survey, "91% of German firms operating in Russia demand the abolition of anti-Russian sanctions," the newspaper noted.

Trade volumes between Germany and Russia increased by 43 percent up to 6.7 billion euro in January and February compared with the same period of the previous year, the newspaper wrote.

"Despite the ongoing crisis in Russia, German companies in the country see a significant improvement in bilateral relations," the article said.

According to the survey, 49% of the respondents call for the immediate abolition of economic sanctions, while 42% demand their gradual reduction. Only 8% of the companies want the sanctions to stay in place, while 1% calls for their extension.

[quepassa] 22/4/2017 16:33

Hi loganair,

Still a keen reader of your many good posts.

Great and informative reading. - Thank you kindly for all your efforts.

QP

[loganair] 22/4/2017 13:19

In March figures from the Russian central bank have shown it added some 800,000 ounces – 24.9 tonnes - to its gold reserves bringing them to around a total of 1,679 tonnes. Overall the nation has added a little over 65 tonnes in Q1.

[galeforce1] 10/4/2017 17:44

It's surprising that despite that concentrated ownership, which must reduce the free-float and must have involved a lot of buying, the discount to NAV is still around 15%.

It would be nice to see this discount getting smaller, but that seems unlikely until the political situation calms down a bit.