The turmoil in the Russian stock market has created once-in-a-lifetime buying opportunity, with huge disparities between company results and share price performance, according to emerging
The turmoil in the Russian stock market has created once-in-a-lifetime buying opportunity, with huge disparities between company results and share price performance, according to emerging markets boutique Hexam Capital.
Marina Akopian, lead manager of the Hexam EMEA Absolute Return Fund, believes the Russian market has hugely over-reacted to the Georgia conflict, pricing in a worse scenario than the 1998 crisis, when a bankrupt Russian government was facing political and economic isolation This, she says, creates a unique opportunity for anomaly-seeking investors.
Akopian says that Russia is now one of the world’s cheapest markets, trading at a P/E ratio of 5.6 times 2009 earnings, even though many companies have delivered phenomenal performance in recent months. She points to potash producer Uralkali, whose share price has slumped 53 per cent over the last three months despite first-half revenue growth of 114 per cent and net income up 261 per cent year-on-year.
She argues that the market has also failed to fully appreciate the likely impact of forthcoming tax cuts, with the government poised to offer RUB400bn of breaks to Russia’s heavily-taxed oil companies in a bid to fuel growth. Akopian believes this will prove a major fillip to the industry and has increased her fund’s weighting to Russia as whole from 20 to 40 per cent.
‘The Russian market today is effectively blind and driven by fear,’ she says. ‘It has priced in a worse scenario than the crisis of 1998, which in my view is simply ridiculous. The Russia of today is a very different proposition to that of 10 years ago, which was bankrupt and in complete disarray. It now has the world’s third-largest foreign exchange reserves and among the lowest debt-to-GDP ratios globally.
‘There are some incredible bargains to be had in Russia at the moment and I believe this is a unique buying opportunity. Companies’ share prices bear little or no relation to their results, and even the best performers are being punished by a market that cannot discriminate between winners and losers. Russia is by far and away the best place to invest in emerging markets in the current climate. We will probably never see an opportunity like this again.’
Hexam Capital is specialist emerging markets boutique established as a 50:50 joint venture between four specialist emerging market managers led by Bryan Collings and Resolution Asset Management (soon to be Ignis Asset Management). Resolution provides distribution and back office systems, leaving the team to focus on investment management.
The firm currently manages four products, the long-only Global Emerging Markets Fund and Emerging Europe Fund, and two long/short strategies, the EMEA Absolute Return Fund and Global Resources Absolute Return Fund.
Akopian, who is also co-manager of Hexam Emerging Europe Fund, joined Hexam from Baring Asset Management in July 2006. She began her career in fund management in London in 1996, after securing a postgraduate placement at Pictet Asset Management as an investment analyst covering Russia and Eastern Europe.
Resolution Asset Management is a UK-based multi-specialist investment firm with GBP 51bn in assets under management, specialising in management of life insurance funds and joint-venture boutique operations that in addition to Hexam Capital comprise Argonaut, a specialist in European equities, UK equities manager Cartesian and multi-managers team Maia.
