By Mark Robinson Head of Equity Research at UniCredit Securities
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Russian funds and ETFs saw cumulative net inflows of $214.5mn in the week to 24 February, EPFR data shows.
In contrast to the previous week, when ETFs drove the net positive, this time traditional funds brought in the majority of new cash ($198m vs. $16.5m).
Global emerging markets funds also saw net inflows of $509mn. Moreover, EPFR’s January statistics show that GEM and EMEA funds increased the weight of Russian securities in their portfolios: from 7.21% in December 2009 to 7.66% and from 46.42% to 49.04% respectively.
Although January was the first month since July 2009 that saw net outflows from Russian securities ($507 million), YTD the trend is still positive: both Russia and GEM funds show net inflows of $447m and $1.3m respectively.
Our view: We regard the fact that Russia-dedicated funds saw net inflows during the recent market correction, as well as the increase in allocation of cash to Russian securities, as positive for local stocks. We believe the reason is their relative cheapness: the MSCI Russia index’s forward 2010 P/E ratio is currently at 7.4X vs. the MSCI EM index’s 8.2X, while Russia has slightly superior EPS growth prospects than emerging markets in general.
Conclusion: The news is slightly positive for the Russian stock market. We intend to monitor the data closely in coming weeks, in particular to assess whether there is any risk of sentiment contagion from the ongoing political news flow in Turkey.
