Equities in Moscow seem much better placed than their counterparts elsewhere in the emerging world and today’s macroeconomic data only bring that point home. This is a great time to be pushing deeper into Russia and funds like RSX (quote).
Disposable income is surging ahead in Russia. Real wages are up 13% year over year and the people are actually spending that money — retail sales are coming in much better than expected. U.S. economists would be grateful to get a 7.7% annualized print on the tape, and while some are grousing about a 0.4% month-over-month decline, that’s really a small wiggle in a pretty big trend.
The numbers keep coming in great. Unemployment is down to 6.5% and industrial investment is soaring at a rate of 15% a year. And yet inflation is down around the lowest levels
seen in the post-Soviet era.
Selling Russia, much less a world-class company like Gazprom (OGZPY
), in the face of this macro environment does not make sense. The big indices are up 23% year to date and below the indices, things actually trade very well — whether U.S. traders can actually get direct access is another story.
And yet on a raw earnings basis, Moscow is trading at a 45% discount to global emerging markets funds like EEM
) and its P/E of 11. This does not make sense.
This is not a “Putin put” scenario. Political risk has been erased
at this point — Putin’s next government will start executing on its mandate soon and the headlines will start coming in soon.
There are some losers in Moscow. Companies like Five do have their fleas, but these are dogs only the hedge funds can really whip. If oil remains as tight
as everyone thinks it will, look to Russia to outperform between now and the summer.