Blogs & Comment

Bargain bin stocks: Russia

Russian stocks are one of the best bargains around, says Reuters Breakingviews.comcolumnist, Jason Bush. They are down 40% over the past two years, compared to 15% for the MSCI Emerging Markets Index. And the Russian markets forward price-earnings ratio of 6.6 is approximately 40% less than the same ratio for emerging markets.
Meanwhile, the Russian economy has had a bigger turnaround, going from -7.5% growthin GDP last year to 5% growth this year. Morgan Stanley predicts corporate earnings per share will grow 50% this year, compared to 25% in China — yet Russias stock market is trading at a 42% discount to the Chinese market — far below its long-run average discount of 28%.
Russia recently displaced China as Morgan Stanleys No. 1 pick among emerging economies. But jitters over the break-up of Europe and a slowdown in the global economy seem to be keeping investors out of Russia right now. Whenever the appetite for risk returns, Russian stocks could see a nice run, concludes Bush.
There are two exchange-traded funds for Russian stocks. Both have high exposure (nearly half) to the oil and natural gas sectors.
Market Vector Russia ETF Trust ( RSX) — most traded SPDR S&P Russia ETF ( RBL) — new kid on the block