Ahead of its expectations of further quantitative easing in Europe and the US, Russian financial firm Aton has issued a paper detailing the potential impact on Russia's economy.
Ahead of its expectations of further quantitative easing in Europe and the US, Russian financial firm Aton has issued a paper detailing the potential impact on Russia’s economy.
Aton’s analysis shows Russia is set to benefit from the QE rally. The paper states previous quantitative easing periods have been favourable to emerging markets relative to developed, particularly Russia.
The sectors that are likely to benefit most are consumer staples and financials, Aton finds. This expectation is supported by data from previous QE periods and by the strong performance of these two sectors in recent months.
The outlook for commodities, on the other hand, is rather bleak. ATON expects oil prices to drop in the coming year, negatively affecting Russia’s economy. Its analysts expect oil prices to drop 13% by the end of next year – well below the more optimistic consensus of 1% growth.
In terms of investment strategy, Aton recommends a focus on dividends. Despite the reputation Russian companies have for paying low dividends, ATON says that these stocks have experienced robust gains over the past three years.
Many Russia equity managers share the enthusiasm for dividends. Global asset managers such as Fidelity and HSBC Global Asset Management, which invest in Russia, favour this approach in their portfolios.
Some managers in the country itself also have a similar approach. VTB Capital Asset Management was the latest to tap into the dividend story. This week, the manager launched the country’s first dividend fund to buy both domestic and foreign stocks.
The government’s push to make Russian companies distribute 25% of their earnings to shareholders from the end of the year will also help matters.
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