Russian market, fund flows overtake BRIC peers

Last week the Russian stock market attracted more money from investors than its other BRIC peers. Combined with the leading performance of Russia’s indices, this has put Russia in a favourable position for the first time in weeks.

The Russian stock market received $173m in portfolio investments over the past week, according to Sberbank CIB – the new name given to the Troika Dialog/Sberbank business following the merger earlier this year.

The strong inflows have put Russia among the leaders for the emerging market region in terms of attracted inflows.

According to Ovanes Oganesyan, analyst at Sberbank Investment Research, Russian companies traded with a P/E ratio slightly above five times.

At the same time, Russia’s indices have performed better than all of its BRIC peers last week, after lagging behind for quite some time.

The FTSE IOB Russia GDR Index was the best performer, gaining 2.5% last week and up 12.1% year to date. The RTS Index also rose 2.1% and the MICEX added 1.3%.

In comparison, the MSCI emerging markets index rose 0.7% for the five days last week and is up 10% year to date.

Sberbank CIB’s chief economist Evgeny Gavrilenkov says Russia’s growth of 3.5%-4.0% this year and next “does not look bad” amid expected economic contraction in Europe, slow growth in the US and deceleration in China.

Even compared with Eastern Europe, Turkey and India (not to mention Brazil), Russia does not look too bad, he says.

However, he is concerned Russia’s economy is prone to the impact from the global economic slowdown. He says it is particularly vulnerable to weakness in the European economy, even though this impact has been moderate so far.

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