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Russia: Too Late To Sell

Oleh Kombaiev profile picture
Oleh Kombaiev


  • The Russian market returned to the level of a year ago, showing the worst dynamics among the EM countries.
  • The economic and geopolitical situation around Russia both have a tendency to improve.
  • Long-term foreign investors are not willing to leave this market.

Investment Thesis

The fact that the Russian stock market is clearly oversold means investors will be counting on the growth of the VanEck Vectors Russia ETF (NYSEARCA:BATS:RSX) (a fund offers exposure to equities from Russian) up to the level of $21 in the current year.

For the first half of the year 2017, the Russian stock market demonstrated the worst dynamics among the countries with developing markets with a result of -13%, losing even to Brazil, which was severely affected by the political crisis. The dollar-denominated Russia Trading System (RTS) index is now at the level of June 2016. Therefore, an investor should ask himself: isn’t this market too oversold?

Let's start with the general macroeconomic situation, which, however, only creates the background, but does not determine the dynamics of the Russian stock market.

The growth of the Russian industrial production in May totaled 5.6% YOY showing the best result for the past three years. Partly this was due to statistical and one-time factors. For example, there were 20 working days in May 2017 as compared to 19 working days in May 2016. Abnormally cold weather in May also provided support to the public sector. Nevertheless, it is noteworthy that for the first time in two years, all the key sectors of the economy demonstrated positive dynamics of growth:

Russian Industry

It is worth noting that in May, the Russian retail turnover growth accelerated to 0.7% YOY (+ 0.1% YOY in April):

Russian retail turn

Activity in the non-food segment is confirmed by a surge in sales of new passenger cars. In May, the growth in this segment amounted to 15% YOY (+7% YOY in April):

Sales of new passenger cars in Russia

The domestic demand in Russia is supported by the increase in the nominal (+ 7.9% YOY) and real (+ 3.7% YOY) wages. However, this is insufficient to confidently state that the growth dynamics of the real disposable income of

This article was written by

Oleh Kombaiev profile picture
Individual investor, data and financial analyst. I am interested in investment decisions based on objective methods of modeling and statistical analysis. Besides, I pay much attention to the psychological aspects of decision making.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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