By Vladimir Kuznetsov, Equity Analyst At UniCredit Securities
Thanks to the sixth straight week of net inflows into Russian funds and ETFs in the week to 25 March 2010, the total volume of net attracted cash YTD reached almost $1.3bn (vs. $2.0bn for all of 2009), EPFR Global data shows.
On the other hand, weekly inflows continued to shrink in comparison to previous weeks and totalled $ 112m. Global Emerging Markets funds, where Russia’s share dropped from 7.7% in January to 7.2% in February, saw net weekly inflows of $1.2bn.
YTD GEM funds are also in positive territory with net inflows of $3.5bn. EPFR also published supplemental data for February, which shows that Kazakhstani securities were the leading asset class among EMEA equity funds by net buying volumes, totaling almost $80m (for comparison, Russia saw net selling of $6.4m).
Our view: Given that prices for oil and other commodities remained strong in recent weeks and Russian stocks are still relatively cheap (The MSCI Russia Index 2010 P/E is still 7.9X vs. 13.0X for MSCI EM Index), the continuing strong inflows do not look surprising and remain positive for the Russian stock market.
On the other hand, given that non-index equity funds have an advantage in being selective in their stock picking, we may see a continuation of the latest trend, in which the main indices are driven largely by mid-caps and individual blue chips, like Sberbank or Norilsk Nickel, whereas oil and gas heavyweights lag and prevent the indices from stronger appreciation.
The news on strong buying in Kazakhstani stocks also looks positive and supports our bullish call on Kazakhstan. We note that all stocks in our Kazakhstani index (Bloomberg ticker: UNCSKZEI) remain Buys, and the index offers an attractive upside of 41%. Conclusion: The news is positive for both Russian and Kazakhstani stocks.
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