Monday, May 08, 2006

FTfm - Time to get into the volatile Russian stock market

Jonh Dizard, writing in today’s issue of the Fund Management supplement in the Financial Times, affirms that now is a good time to get into Russia’s volatile stock market.

  • Although you are not getting in at the beginning of the move and the stocks have already appreciated a lot (the CSFB ROS index rose by more than 105 percent in the last year), there are still bargains to be had.
  • Apply reasonable measures of value as price/earnings ratio and price of oil reserves.
  • Downward adjustments in commodity prices do not seem to greatly affect the stock.
  • Large trade surplus and flight of capital has been reduced.
  • Oil companies are cheap compared to their international counterparts.
  • Buy LUKOIL, Gazprom, Surgut and UES (trade not hold). Norilsk is ambiguous as it trades at less than 10 2006 earnings but has some corporate governance issue, as William Browder (investor who has recently been barred from entering Russia) points out.
  • Internal market demand will mean that there will be to whom to sell to.
  • Volatility is four times higher than in the West.

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