Uralsib Investor Watch (20)
By Chris Weafer
It is nothing new to say that the investment case for Russia is mainly predicated on global economic trends. That has been the case all year. But, two domestic items have recently become very important and raised at least the perception of higher investment risk in Russia. Thus justifying, for many investors, the very cheap discount that, on average, equities and the ruble are trading relative to EM peers. Those two events are the growth in inflation and the plan by Transneft to takeover Novorossiisk Seaport. If the former is not contained and the latter is not handled in a way that protects the rights of minority investors, then the perception of higher risk will be justified and damaging. Already, over the past five days the IOB Index of Russian GDRs fell 2.5% while the MECI EM Index gained 2.3%.
By Chris Weafer
Monday is the international day for the remembrance of the slave trade and its abolition. But, while human slavery has been substantially reduced since President Lincoln’s proclamation in 1862, most global equity markets and developing economy currencies remain very firmly enslaved to the trend in the US economy and the direction of Wall Street. The domestic story, especially in economies like Russia that are so dependent on commodity exports, is only of secondary importance. If the recent deterioration in the US growth trend continues then equity markets elsewhere are more likely to suffer from further emaciation than to achieve emancipation.