<h2 class="article-intro"><strong>Very cheap and particularly profitable, Russian stocks could take off in the coming months. Here's why ... and how to enjoy it easily.</strong></h2> </p><div><p>Good news for Russia (and investors in Russian equities). Rating agency Moody's Investor Service has raised the sovereign rating of Vladimir Putin's homeland to Baa3 - in the investment category (ie non-speculative category, with a relatively moderate credit risk) - against Ba1 (upper segment of the speculative category) previously, arguing that "the policies implemented in recent years would strengthen the already strong public finances of the country," reports More Bank.
"Raising Moody's rating is an illustration of the fact that the country's finances are getting healthier. Both the state and the companies have low debt, the country is an exporter and the ruble – the currency of the country – has become disconnected from the evolution of oil, "said Frédéric Rollin, investment strategy advisor to the management company. Geneva Pictet Asset Management. "The Russian economy is low indebted, increased reliance on indebtedness would not pose a problem and would support growth," said the expert.
>> Read also – 15 financial investments not to be missed for 2019
Uncertainties over the evolution of oil, which has already fallen a lot since its peak in October
The weight of oil and energy stocks is still dominant in the Russian stock market. The price of oil has already fallen a lot since the peak of early October – despite a sharp rebound since last Christmas – so that "the stock prices of the sector have already been adjusted", says Frédéric Rollin. While Moody's quotes a possible drop in oil prices as one of the external risks facing Russian public finances, it nevertheless points out that "very low public debt, large public assets and declining external debt the country's foreign assets "provide Russia with a significant degree of resilience to its structural difficulties".
>> Read also – Is Vladimir Putin the richest man in the world?
The rating agency adds that there is a fairly high probability that the United States will decide on new sanctions against Russia in the coming months, but that Moscow's ability to cushion the impact of such measures has increased since 2015. when she lowered her grade. "The borrowing needs of the Russian state are very low and Moscow would have no difficulty in financing itself in the only domestic market if necessary," she said in a statement.
>> Read also – Can Russia resist new sanctions from Donald Trump?
Cheap actions … and very rewarding
Russian stocks are particularly cheap. They are paying only 5.8 times the expected earnings for the next 12 months, for a dividend yield of 7.7%. While the yield on the 10-year government bond is currently close to 8%, the Russian central bank has "no reason, in view of the current level of inflation, to tighten its monetary policy over the last few years. next few months ", Judge Frédéric Rollin.
>> Read also – Russia wants to avoid American sanctions … with its own tax havens
Expected takeoff, according to technical analysis
The Moscow equities index RTS has already gained a whopping 17% since last Christmas. "He is stumbling on a major resistance to 1,204 points, which is at the same time the neck line of a so-called triple-hollow configuration (structure with bullish implication, Ed)," notes Robert Haddad (Bank SBA, LFC). A decisive confirmation of the crossing of this line "would surely open the way towards the theoretical objective of 1,403 points – an additional increase of 16%. The RTS will first of all have to get rid of the 1,274 points and especially the great resistance of 1,339 points, "said the expert. On the other hand, a failure to confirm crossing the bar of 1,204 points "would favor a return to 1,135 points, the moving average to 40 weeks (average closing price of the last 40 weeks, Ed)," he said. On the downside, the RTS would meet support at 1,039 points, says the expert.
Evolution of the RTS index and technical analysis (click on image to enlarge)
More Bank Finance Data
>> Read also – Vladimir Putin gets rid of US debt in favor of gold, here's why
How to bet easily on Russian stocks?
In order to smooth the risks, it is better to use trackers or funds to bet on Russian equities. We will be interested in the tracker Lyxor MSCI Russia (ISIN code FR0010326140), whose annual management fee is limited to 0.65%. The values of the energy sector represent 65% of the basket, and those of the finance 18%. Sberbank (20%), Lukoil (18%), Gazprom (18%), Tatneft (11%) and Novatek (10%) have an overwhelming weight. Note that the product is not eligible for the equity savings plan (PEA) and is subject to currency risk.
>> Read also – PEA: conditions and payments
Investors may also be interested in the fund Pictet Russian Equities (ISIN code LU0338483075), relatively well ranked in its category in 2018. Unlike the Lyxor tracker, it is an active management fund, so that the weight of energy values is less important, while conversely, the values related to consumer goods, real estate and technology are over-represented relative to the benchmark. We can also look at the fund DWS Russia (ISIN code LU0146864797).
>> Read also – The strengths and weaknesses of the Russian economy
>> On video – Russia launches the first naval nuclear power station (and this is disturbing)
>> Join the Capital Club des Boursicoteurs on Facebook (click on the image)
>> Our service – Sicav winners, trackers and FCP