BNE Intellinews (Germany): Russia is turning into a safe haven for investors in the context of growing instability in the world

a Year ago, investors kept an eye on Russia, first and foremost worried about the instability, the cause of which was its geopolitical confrontation with the West. But a year has passed, and today is most alarming is not the geopolitics, and global economic instability. Now many investors see Russia as a safe haven in an increasingly hectic and unpredictable world.

“In comparison with the situation a year ago, the attitude to Russia has changed dramatically: today, a key risk factor seems no longer geopolitics, and global economic instability. Now Russia is considered as a safe haven — thanks to its gold and foreign exchange reserves and sound macroeconomic policies. Low valuation ahead of the importance of high dividends, and the new Russian government together with Putin’s initiatives costs are perceived positively,” — said the chief economist of the BSC Global Markets Vladimir Tikhomirov.

the Majority of investors are overestimating the Russian campaign: 59% of trust funds are overweight, 33% are equal to weight and the others are underweight.

the President of Russia Vladimir Putin has spent the last few years to build a “fiscal fortress” record-high gross international reserves, which exceeded the pre-crisis peak levels and is approaching 600 billion dollars. It was a revised budget, and the budgeted crude oil price decreased significantly from $ 115 per barrel, which was characteristic of a period of economic growth, to about $ 40 per barrel, which is much less than the average price of oil the last few years. For a while, until the current Prime Minister headed the Federal tax service, taxess revenues rose 20% despite the fact that the tax burden increased by only 2 percentage points. But public and external debts are now covered by dollars per dollar of cash resources. In short, today in its macroeconomic indicators, Russia is ahead of all other major economies of the world.

All this has not escaped the attention of bond investors, who began to actively invest in the Russian market and now own about a third of all ruble-denominated Federal loan bonds of the Russian Ministry of Finance is the main source of budget financing.

last year, this more favourable trend has spread to the Russian stock market. The Russian RTS index showed strong growth, with the result that he entered the three markets with the best indicators in the world. The beginning of this year was very successful, and during the first two weeks the Russian stock market grew by 10%, but the epidemic of coronavirus in China upset all plans, and at the moment it remains sluggish with the exception of the electricity sector, which to date have increased by 16%.

the Contextthe stock market Quotations on the screen at the Moscow stock exchangeBloomberg: the largest investor in the Russian economy — СШАBloomberg08.11.2019 Russia: investments are reduced, foreign companies continue to operate (Le Figaro)Le Figaro22.05.2019 Handelsblatt: investment in Russia can be прибыльнымиHandelsblatt15.03.2019 According to analysts, the sale of stock the last few weeks — is likely a temporary phenomenon. The speed of propagation of the coronavirus is slowing, as reported by the company “the Renaissance the Capital», which followed the development of the epidemic, and investors will return to the previous core indicators, when in the coming months the number of newly infected is significantly reduced.

Then, the attention will again switch to geopolitics, however, there Russia begins to behave not as adaptable to the circumstances of tactics, which it portrayed the last few years, and increasingly as an important geopolitical player whose opinion must be considered. The report, entitled “Nezabudnite” (“Westlessness”), published in the framework of the Munich security conference, says that the West has lost the initiative in the rapidly growing emerging markets, which prefer to act independently. Amid these changes, the President of France Emmanuel macron and German Chancellor Angela Merkel is now actively trying to start a “reset” of relations with Russia, which, in turn, communicates with the new President of Ukraine Vladimir Zelensky, to minimize the armed conflict in the Donbass. In short, Russia has a good chance to return to the fold of the international Committee this year.

in addition, investors ‘ interest is further fueled by proposals for significant public investment in the Russian economy now, when it was launched 12 national projects that are expected to accelerate economic growth and increase incomes of Russians.

global instability

“Hardly anyone should be surprised that global instability was the main concern of investors, when we met with them in February. News about the epidemic of coronavirus, as well as the continuing friction in global trade led to the growth in risk assessment”, — said Tikhomirov.

In the current conditions Russia stands alone, sweatth that the last five years she has been preparing to shocks in the form of sanctions. But, since the likelihood of introduction of new sanctions decreasing, it turned out that Russia is better prepared for all economic shocks, which can result in the spread of coronavirus and a trade war.

“ironically, those geopolitical risks, which launched this process and forced Russia to strengthen its domestic positions do not seem to investors the main cause for concern. In fact, customers now appreciate Russia’s achievements on the macroeconomic front, low level of debt, high level of foreign exchange reserves, reasonable fiscal and monetary policy, stable currency and a moderate loss in the dynamics of growth”, — said Tikhomirov.

Ceasing to fear the whip, investors turned their attention to the cakes, that is, national projects. Although associated costs will help to spur economic growth and rising incomes, there remain some doubts whether these measures will be effective. This is reflected in the forecasts of economic growth for the current year, which range from 1.5% (Organisation for economic cooperation and development) to 2.6% (“Renaissance Capital”).

the Confidence that positive changes will occur, strengthened after the reshuffle in the Russian government. Investors believed the Medvedev administration is weak and ineffective, so a new administration mishustina they perceive as significant improvement.

“there is No investor who would be negatively perceived recent changes in government. The majority (58%) considered their change for the better, and the rest treated them neutrally. Meanwhile, the first steps taken by the office, give reason for optimism OsoBenno new attempts to modernize the public service and breathe new life into the program of national projects,” explained Tikhomirov, who recently met with more than 30 professional investors.

This renewed interest in Russian stocks and bonds does not necessarily lead to rapid growth because of the optimistic feeling right now investors remained cautious. More of them are worried about low growth of the Russian economy and the uncertainty associated with the fact that the new Cabinet has just started. However, if the Russian economy will begin to demonstrate noticeable growth, enthusiasm, investors can quickly gain momentum.

“Political change and prospects of the national project was, I think, the most discussed topics, — said Tikhomirov. Investors agreed with us that the Kremlin has made changes in the Cabinet in an attempt to breathe new life into the program of the national growth, although many of them noted that it is still too early to draw any reliable conclusions about how successful will this change in government.”

the new York times contain estimates of the solely foreign media and do not reflect the views of the editorial Board of the new York times.