Jason Corcoran in Moscow.
Korean and Russian equities were the two strongest performers amongst global markets during March.
The MSCI Russia Index rose by 20.3% during the month, not too far behind the stellar 26% growth of Korean equities.
Russia’s equity market significantly outperformed the MSCI Emerging Markets EMEA Index, which rose +13.5% in the same month. The dollar-denominated RTS index did even better, posting a gain of 26.5% in March.
The main reason for the turnaround in Russian equities is the fact that oil did not sink below $30 p/bbl, as was feared, but instead rallied to over $50 per barrel.
Higher oil enabled the Russian Central Bank to get control over the rouble and the government to talk more confidently about measures to help the economy survive the crisis. A rising rouble appreciated +5.8% against the US Dollar during the month.
However, major institutional investors have yet to be tempted by the Russian market’s uptick and remain stubbornly on the sidelines.
During the week ended April 1, emerging-market stock funds received $1.2 billion, according to fund data tracker EPFR Global. Of the total, a paltry $29m was earmarked for Russia while China received $140m.
It’s my bet that the lemmings will fall one by one from their cash positions into EMEA and the markets where prospects for outperformance look more likely. This could well trigger some profit taking but it’s no reason not to stay long on Russia.
