There are no signs of loosening sanctions by the West. In fact, the opposite is the case: the USA has imposed new sanctions, which among other things have led to another bout of depreciation of the Russian currency. So far, the negative effects of the sanctions have been partially absorbed by the fluctuations of the price of oil and other commodities, but in the long run the bottom line of the consequences will be strictly negative for the Russian economic outlook. From an investor’s perspective, the last round of US sanctions is particularly negative given that for the first time listed companies and their international operations have been affected by politics.

This situation notwithstanding, the outlook of Erste AM for the Russian equity market is generally positive. “At a PE of about 6x on the basis of expected earnings, the market commands an attractive valuation’, says Alexandre Dimitrov, manager of the Russian equity fund ESPA STOCK RUSSIA (assets under management: EUR 32mn). The valuation discount relative to other emerging markets is clearly above 40%. Also, the Russian equity market offers a dividend yield of more than 6%, which is bolstered by both earnings forecasts and foreseeable dividend policy.

At the moment, Dimitrov prefers export-oriented companies with healthy balance sheets that can boost their profits also in a difficult environment. These are mainly listed companies in the energy and commodity sector that benefit from the low rouble and offer investors a high dividend yield.

Photos:

Peter Szopo, equity strategist Erste Asset Management, and Alexandre Dimitrov, manager of the ESPA STOCK RUSSIA equity fund, see a positive outlook for the Russian stock market in the context of the Football World Cup.

Photographer: Martin Hörmandinger, publication free of charge, rights at Erste AM