By Steven Orlowski
Famed investor Jim Rogers suggests the Russian market may be undervalued and could present significant opportunity for investors. Rogers stated that after a recent visit to Russia he came away impressed with progress influenced by the actions of President Vladmir Putin.
Although referring to Putin as a criminal, he felt Putin realizes he must do things differently. Rogers cited a pool of billions of dollars the government has set aside for investments to be made alongside private investors. He cited his own assessment of the low valuation of the Russian market along with an unfortunate concentration in oil and gas.
Rogers is not yet invested in the Russian market, but is considering it after observing the country’s ebb and flow for the better part of twenty years. He believes the country has learned its lessons from the past and should be a better investment in the future. Rogers says he is interested in buying the ruble.
CNBC also quoted Todd Berman, Head of Investment Banking at Troika Dialog, as having said that Russia’s recent entry into the World Trade Organization is a major accomplishment which will help advance reforms that should propel the Russian economy forward.
Rogers commented on the United States in the context of the upcoming election. Making the claim that the biggest difference between the two candidates is “one comes from Chicago and the other comes from Boston” he sees no fundamental difference in how things will be in the States post-election. His outlook is fundamentally negative and his interest in the Russian market is evidence of the ongoing need for investors to look to emerging markets for future investment returns.
The Market Vector Russia ETF Trust (NYSEARCA:RSX) and the Market Vectors Russia Small-Cap ETF (NYSEARCA:RSXJ) are two primary Russia oriented ETFs. RSX has done fairly well this year, up about 8% since January.
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But RSX has been clearly lagging the U.S., as shown in the chart below comparing RSX with the SPDR S&P 500 Index ETF (NYSEARCA:SPY).
RSXJ however, is essentially flat for the year.
It is also significantly lagging the S&P 500 since its inception.
Given Rogers negativity toward the U.S. and his recent and increasing interest in Russia, if he is proven correct, then both RSX and RSXJ may be good candidates for investment. If Russia, which has been less affected by European woes, can continue with a proactive agenda of reform and investment, there is no reason the “undervalued” Russian market cannot flourish.