deze Russische broker (Aton) waarschuwde kort voor de correctie dat de Russische markt overgewaardeerd was; dat is wel een reden om waarde te hechten aan hun huidige oordeel dat deze markt langzamerhand weer koopwaardig begint te worden
22 June 2006, Thursday
Equity strategy. Russian equities offer good fundamental value
The market now offers good upside to our end-2006 target of 1,653; we turn positive. Following our market downgrade on May 10, the RTS Index has declined about 20% to around 1,400, in line with the flow-driven correction seen in many other emerging markets. At the same time, we see no reason to change the price targets for our universe as they were estimated based on realistic assumptions that remain valid, in our view (long term Brent price of $50/bbl, base cost of equity for blue chips of 11.5%). As a result, many stocks we saw as expensive a month ago now look increasingly attractively valued; the same applies to the broader market.
Russia’s strong financial position and low dependence of the economy on foreign portfolio flows suggest limited macro risks. Historically, full-blown crashes in emerging markets stemmed from major adverse macro developments, be it government debt default, devaluation, bank crisis, revolution and the like. Also, historically most affected countries were those where foreign portfolio investment flows constituted a large percentage of GDP and/or total cross-border capital investment flows. On both of these counts, Russia really stands out among its emerging market peers due to its exceptionally strong fiscal position – twin surpluses, $250bn-plus in Central Bank and stabilization fund reserves – as well as the fairly small impact of portfolio flows on everyday economic activities.
The oil price – the key variable for Russia and Russian equities – remains high. The Brent price continues to hover around $70/bbl, suggesting another record year for Russian oil & gas majors as well as companies in other sectors, such as retail, banking, consumer goods and engineering as export revenues ultimately flow into nearly every sector of the economy. It also appears that the stubbornly high oil price increasingly reflects volatility premium to account for the continuing geopolitical tensions, which means it could take longer for the oil price to normalize than if it was driven by purely market factors.
Flow of funds sentiment important in short-term; fundamentals to prevail in medium-term. A combination of continuing volatility, depressed sentiment, lack of inflows, new equity supply and perhaps even the World Cup may keep investors on the sidelines and the market range bound in the next few months. However, we believe the current price levels represent a good opportunity to build a quality portfolio of inexpensive, well managed and rapidly growing Russian and FSU companies that on a 12-18 month view should deliver very strong returns, both in absolute terms and relative to other emerging markets.
Our top picks among large caps are Lukoil, TNK-BP, Norilsk Nickel, Mechel, mobiles (MTS, Vimpelcom), Comstar UTS and select consumer names (Pyaterochka, Seventh Continent, Lebedyansky and others). We also remain big fans of Russian/FSU oil & gas and mining independents. Our top picks in that segment remain Sibir, Arawak, Dragon Oil, Imperial Energy, European Minerals and Highland Gold; we have also upgraded Burren Energy and Celtic Resources to Buy due to their recent price weakness. We would continue to shy away from deep second/third tier stocks, however, except for select distribution names in the power sector.