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My Quick Take On Russia


  • Russia is getting hit hard by the news cycle.
  • It turns out that this is just more of the same.
  • This is a buying opportunity, the article explains why.

They could kiss and make up at any time

The Russian market has been severely punished in the last few days. Yesterday, the MOEX Russia Index was down 8.3%. However, the punishment was compounded by a drop in the Russian Ruble, from 58.1 to the dollar through the weekend, to 63 now, a 8.4% drop. As a result, the Russian RTSI index, which prices in USD, dropped a massive 14.1% in the last 2 days alone.

This drop happened on account of renewed sanctions from the U.S., targeting further Russian individuals and corporations. The effect was particularly pronounced on Rusal and En+, which due to their largest shareholder being targeted, are now in danger of being in default. These stocks dropped in excess of 50% in a matter of days.

The sanctions themselves are related both to:

  • The attempted murder (in London, using a chemical weapon) of a former Russian spy.
  • Developments in Syria, where Russia sides with the sitting Bashar al-Assad dictator, whereas the U.S. sides with several moderate Islamic groups, in both fighting Bashar al-Assad and ISIS.
  • And generic feelings about cyberhacking, U.S. election interference/lobbying, past Ukraine developments, etc.

Leaving aside the weirdness of diplomatic/political sanctions on a country focusing on specific individuals and corporations, the question is on whether all this stock market punishment is warranted from an investment perspective. In my view, it is not. Let me explain why.

Reason #1 – The Type Of Sanctions Isn’t New, And The Economic Impact Is Limited

There are three reasons for me saying this:

  • What we saw with the latest round of US. sanctions was an extension of a pre-existing list based on pre-existing rules. The individuals get restricted movement, the entities get frozen assets in the U.S., restrictions on dealing with U.S. entities, restrictions for U.S. investment in them.

This article was written by

Paulo Santos profile picture
Leader of Idea Generator
Our goal is to beat the S&P500 and to provide consistent positive returns.

Portuguese independent trader and analyst. I have worked for both sell side (brokerage) and buy side (fund management) institutions. I've been investing professionally for around 30 years.

I have a Marketplace service here on Seeking Alpha called Idea Generator that's focused on deep value, real-time actionable ideas based on valuation and catalysts. The Idea Generator portfolio has beaten the S&P 500 by more than 74% since inception (2015).

I can be reached at paulo.santosATthinkfn.com.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in RSX over 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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