Asked whether the so called 'cold war' tactics of the Russian government could impact on investors' nerves and should they see it as a opportunity to invest or to sell up and get out Claire Simmonds, client portfolio manager, emerging markets at JP Morgan Asset Management stalwartly declares politics are very difficult to predict and JPMAM’s focus is on the bottom up.
Dr Ghadir Abu Leil-Cooper, head of EMEA Equities at Baring Asset Management suggests the Russian market is likely to be vulnerable to ‘newsflow’ and that share price valuations are very attractive and corporate earnings growth fast.
Investment trusts investing in Russia are running discounts which are, along with net asset values (NAV) are fluctuating. JP Morgan’s Russian Securities trust is currently (as at 31/8/08) at a 5.5% discount on a net asset value (NAV) of £665.39 and Baring’s Emerging Europe trust at 6.8% discount to £892.98 NAV, Pictet’s Eastern European trust at 6.4% discount to £337.00 NAV, leaving investors needing to take a cautious call on how convinced they are by the investment story and how trust managers are investing.
Looking as to whether there are particular sectors within Russia impacted at the moment Simmonds points out the sell-off in Russia has been almost indiscriminate.
“It has impacted all sectors, perhaps with a marginal negative bias towards the more liquid names which are easier to sell out of. With regards to the management of the JPM Russian Securities Investment Trust, in the short-term the risk profile of the country has increased and we expect more market volatility, mostly driven by political uncertainty. “
On the plus side the market correction she says has made some valuations in certain selective names look very attractive giving a good entry point taking a medium term investment horizon. “When looking at current valuations, they should reflect the higher perceived risk profile attached to the country,” she says.
So should investors stay in or go in? Simmonds says the indiscriminate sell off offers a good opportunity over the long-term to selectively position exposure within Russian stocks that have fallen but where the manager still has a strong level of conviction.
“We do not expect a sharp recovery, but are quite confident that we are not far away from the bottom and investments made today will do well in the long run,” she says.
“We feel comfortable we can find stocks in the region on low single digit P/Es and 3-5% dividend yields.”
While optimistic about the market outlook over the long-term the JPMAM view is that in the short-term investors should expect to see continued volatility and lower liquidity.
Leil-Cooper agrees the long-term investment for Russia is compelling.
“Due to its extensive resource base, Russia is one of the main beneficiaries of the long-term growth of emerging economies, especially China. This, coupled with a large programme of infrastructure investment and buoyant consumer spending, is helping to insulate the Russian economy from the global slowdown.”
Dr Ghadir Abu Leil-Cooper, head of EMEA Equities at Baring Asset Management suggests the Russian market is likely to be vulnerable to ‘newsflow’ and that share price valuations are very attractive and corporate earnings growth fast.
Investment trusts investing in Russia are running discounts which are, along with net asset values (NAV) are fluctuating. JP Morgan’s Russian Securities trust is currently (as at 31/8/08) at a 5.5% discount on a net asset value (NAV) of £665.39 and Baring’s Emerging Europe trust at 6.8% discount to £892.98 NAV, Pictet’s Eastern European trust at 6.4% discount to £337.00 NAV, leaving investors needing to take a cautious call on how convinced they are by the investment story and how trust managers are investing.
Looking as to whether there are particular sectors within Russia impacted at the moment Simmonds points out the sell-off in Russia has been almost indiscriminate.
“It has impacted all sectors, perhaps with a marginal negative bias towards the more liquid names which are easier to sell out of. With regards to the management of the JPM Russian Securities Investment Trust, in the short-term the risk profile of the country has increased and we expect more market volatility, mostly driven by political uncertainty. “
On the plus side the market correction she says has made some valuations in certain selective names look very attractive giving a good entry point taking a medium term investment horizon. “When looking at current valuations, they should reflect the higher perceived risk profile attached to the country,” she says.
So should investors stay in or go in? Simmonds says the indiscriminate sell off offers a good opportunity over the long-term to selectively position exposure within Russian stocks that have fallen but where the manager still has a strong level of conviction.
“We do not expect a sharp recovery, but are quite confident that we are not far away from the bottom and investments made today will do well in the long run,” she says.
“We feel comfortable we can find stocks in the region on low single digit P/Es and 3-5% dividend yields.”
While optimistic about the market outlook over the long-term the JPMAM view is that in the short-term investors should expect to see continued volatility and lower liquidity.
Leil-Cooper agrees the long-term investment for Russia is compelling.
“Due to its extensive resource base, Russia is one of the main beneficiaries of the long-term growth of emerging economies, especially China. This, coupled with a large programme of infrastructure investment and buoyant consumer spending, is helping to insulate the Russian economy from the global slowdown.”