Money
20 July 2010
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| Barings Bank |
Baring Asset Management (Barings) says Russia has enjoyed a strong recovery and is now back to pre global financial crisis levels. It says that a number of key market indicators are showing positive signs, and that the Russian stock market offers some of the best value of any globally.
Matthias Siller, manager of the Baring Russia Fund, which has annualised returns of 24.3% for the past 10 years against 20.7% for its index1, comments: "Russia was hit hard by the global financial crisis, but it has bounced back well and much more quickly than many investors thought. Moving forward, key indicators suggest solid growth for Russia and attractive opportunities for investors."
Transportation and industrial production figures - good barometers for the Russian economy - are very positive at the moment. Freight turnover at Russia's far eastern ports, for example, increased to 57.36 million tonnes in the first half of 2010, 1.7 times more than the same period last year2. Industrial production also increased by 12.6% in May this year.3
Barings believes that there are many other positive developments in Russia that investors should be noting. Matthias Siller comments: "First, the exercise of de-leveraging amongst Russian corporates and households is over, which is good news for economic growth. In addition to this, Russia is still a relatively cheap country where the price of a Big Mac for example, is less than in Hungary, Poland, Turkey or the Czech Republic4. With increasing income levels, there is plenty of room for domestic growth. This, coupled with the fact that Russia has a low export dependency makes it an attractive proposition for investors."
The Baring Russia Fund is underweight in the commodities sector and overweight in consumer related industries such as retail, healthcare and mobile telephony. Within the commodity sector, basic material stocks are preferred over oil and gas companies as the current budget policies indicate tax increases in the energy sector that will put cash flows under pressure.
The Baring Russia Fund was launched in January 1997. It has $138.2 million in AUM and over the past year, posted a return of 40.7%1.