Bearish on Russia?

Confidence has fallen but investors still see opportunity

Russia has been under stress because of the situation in the Ukraine and because of the falling oil price – and clearly, as shown by the data above, this has affected the short-term outlook for growth.

But, taking a longer term view, we believe it’s possible to look beneath the headlines to uncover hidden value. In Russia, for example, on a corporate level, we’ve recently identified several opportunities where we believe corporate debt has been oversold and a re-pricing is overdue. One area of interest is companies whose assets or revenues are in dollars and who therefore benefit from a decline in the rouble.

For us, the failure of the market to drill down beneath the surface to recognise these opportunities is part of the attraction. By targeting unloved or out-of-favour areas we aim to capture a long-term structural premium. That’s one of the reasons Russia remains an exciting place to invest.

Robert Simpson – Insight, a BNY Mellon company

Russia has been under stress because of the situation in the Ukraine and because of the falling oil price – and clearly, as shown by the data above, this has affected the short-term outlook for growth. But, taking a longer term view, we believe it’s possible to look beneath the headlines to uncover hidden value. In Russia, for example, on … read more

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The week that was…

In the week ending 14th August, what stole the financial headlines?

Away from the front pages for the past couple of months, the situation in Iraq – where Islamic State militants have made rapid progress in their attempt to take control of the fractured country – has recaptured the attention of the world leaders. Having previously been preoccupied with events in Eastern Europe and Gaza, the attention of Western powers has swiftly shifted to Iraq. Indeed, with Islamic Militants reportedly controlling around a third of Iraq, the US military intervened with its first airstrikes since the withdrawal of US troops in 2011. Elsewhere, events in Ukraine continue to have far-reaching consequences for Russia’s European neighbours. Following a further raft economic sanctions from the West, Russia responded with a series of food import bans, many of which hit European economies the hardest. Meanwhile, Germany’s economy shrank by 0.2% in the second quarter of 2014 – a worse-than-expected outcome attributed in part to the unsettling effect of the Russia/Ukraine crisis on German business confidence.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 15/08/14. ISSG is part of The Bank of New York Mellon.

Away from the front pages for the past couple of months, the situation in Iraq – where Islamic State militants have made rapid progress in their attempt to take control of the fractured country – has recaptured the attention of the world leaders. Having previously been preoccupied with events in Eastern Europe and Gaza, the attention of Western powers has … read more

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Russian import ban offers food for thought

The effects on countries exporting to Russia following the ban imposed by Moscow on Western imports

Geopolitics has once again taken centre stage. Certain regions are feeling the effects of the Russian imposed ban on Western imports more than others. In Eastern Europe, the Baltic States ship roughly 15% of their exports to Russia. This does not look likely to affect global GDP growth, yet the key risk we face is an escalation in tensions between Russia and the West that results in sanctions against the oil and gas industry.  Baltic nations (as well as Slovakia and Bulgaria) are highly reliant upon Russia for their imported energy needs. Reductions in exports and/or potentially higher energy costs could have led us to downgrade growth forecasts for Poland, Latvia and Lithuania in 2014 and 2015.

Tom Higgins, chief economist, Standish

Geopolitics has once again taken centre stage. Certain regions are feeling the effects of the Russian imposed ban on Western imports more than others. In Eastern Europe, the Baltic States ship roughly 15% of their exports to Russia. This does not look likely to affect global GDP growth, yet the key risk we face is an escalation in tensions between … read more

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From Russia without love

German economic expectations turn negative for the first time since November 2012.

The latest release of the German Manufacturing PMI shows a continued economic expansion in Germany and similar data from the IFO confirm this. Nevertheless, momentum has slowed in the last couple of months; the August Sentix reading support this view.

There has been rising uncertainty with regards to the Russian-Ukrainian crisis, especially in light of the downing of MH17. Economic sanctions have been stepped up and are expected to hurt the already sluggish Russian economy. Russia is an important trading partner for Germany. Indeed, in 2013 German exports to Russia totalled €36bn*, with engineering products and the chemical industry important sectors.

More recently, some earnings releases pointed to the potential negative effects of the Ukrainian crisis. The unrest in Eastern Europe certainly hurts business sentiment but the degree to which it may hurt German GDP numbers going forward will depend on how the crisis plays out. The overall momentum of the German economy is sound while consumer sentiment looks set to remain robust. What’s more, positive US data and an improving economic situation in China should help ease the negative effects of the Russian crisis.

Henning Lenz, head of corporate credit, Meriten Investment Management.

*Source: Council on Foreign Relations

The latest release of the German Manufacturing PMI shows a continued economic expansion in Germany and similar data from the IFO confirm this. Nevertheless, momentum has slowed in the last couple of months; the August Sentix reading support this view. There has been rising uncertainty with regards to the Russian-Ukrainian crisis, especially in light of the downing of MH17. Economic … read more

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The week that was…

In the week ending 31st July, what stole the financial headlines?

Following the EU’s announcement of further economic sanctions on Russia following its interference in neighbouring Ukraine, company leaders across Europe warned of the impact on their businesses. The sanctions, deemed the toughest taken against Russia since the end of the Cold War, target the country’s energy, financial and defence sectors. Meanwhile, having shrunk by 2.1% in the first three months of the year – owing much to abnormally poor weather conditions – the US economy grew by an annual rate of 4% in the second quarter of the year. The US Federal Reserve continues to ‘taper’ its asset-purchasing programme and is on track to have completed the process by the end of the year. Elsewhere, as Israel’s bombardment of Gaza continued last week, US Secretary of State John Kerry was heavily criticised by officials in Israel as he failed to broker a ceasefire between the Israelis and Palestinians. The nature of Israel’s offensive in Gaza, a reaction to attacks by Hamas, a Palestinian militant Islamist group, has drawn widespread condemnation from international observers.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 01/08/14. ISSG is part of The Bank of New York Mellon.

Following the EU’s announcement of further economic sanctions on Russia following its interference in neighbouring Ukraine, company leaders across Europe warned of the impact on their businesses. The sanctions, deemed the toughest taken against Russia since the end of the Cold War, target the country’s energy, financial and defence sectors. Meanwhile, having shrunk by 2.1% in the first three months … read more

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The week that was…

In the week ending 24th July, what stole the financial headlines?

A week on from the downing of a Malaysian airliner over Eastern Ukraine, the blame-game was in full flow with the West quick to point the finger at Russia for its continued interference in Ukraine. Meanwhile, the West announced plans for a further raft of economic sanctions on Russia. Elsewhere, there was no let-up in Israel’s bombardment of Gaza and, as the death toll rose, John Kerry, US secretary of state, travelled to the region in an effort to broker a ceasefire between the two factions. In other news, there was a focus on hedge funds which, while currently the victims of low market volatility, are being tipped to shine as and when the US Federal Reserve chooses to increase interest rates.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 25/07/14. ISSG is part of The Bank of New York Mellon.

A week on from the downing of a Malaysian airliner over Eastern Ukraine, the blame-game was in full flow with the West quick to point the finger at Russia for its continued interference in Ukraine. Meanwhile, the West announced plans for a further raft of economic sanctions on Russia. Elsewhere, there was no let-up in Israel’s bombardment of Gaza and, … read more

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The week that was…

In the week ending 17th July, what stole the financial headlines?

The downing of the Malaysian airliner in Ukraine on Thursday was swiftly followed by renewed bouts of finger-pointing by the Ukrainian and Russian governments, each adamant the other was responsible for the tragedy. Russia’s influence on the separatist rebels occupying the area of Eastern Ukraine in which the plane came down was the subject of much rhetoric from Western leaders, with the prospect of further economic sanctions on Russia looking increasingly likely. Meanwhile, after US Federal Reserve (Fed) Chair Janet Yellen suggested the Fed was in no hurry to raise interest rates, Larry Fink, chief executive at Blackrock, urged the central bank to end its crisis-era policies. On the economic front, despite weakness in the US housing market (most notably in home building), employment numbers and manufacturing activity are painting an increasingly positive picture for the economy.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 17/07/14. ISSG is part of The Bank of New York Mellon.

The downing of the Malaysian airliner in Ukraine on Thursday was swiftly followed by renewed bouts of finger-pointing by the Ukrainian and Russian governments, each adamant the other was responsible for the tragedy. Russia’s influence on the separatist rebels occupying the area of Eastern Ukraine in which the plane came down was the subject of much rhetoric from Western leaders, … read more

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The week that was…

In the week ending 10th July, what stole the financial headlines?

Minutes from the Federal Open Market Committee’s June meeting showed the US Federal Reserve hasn’t altered its expectation of an interest rate hike in the second half of 2015, while tapering is in line to be completed this October. Meanwhile, questions continue to be asked over the veracity of the US economy recovery. US employment numbers continue to impress while lending to businesses is reaching record highs but doubters remain plentiful in number. In Europe, all has gone quiet on the Eastern front as President Vladimir Putin mulls his next move with regards to Ukraine. This follows a speech two weeks ago in which he accused the US of Cold War tactics.

 

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 10/07/14. ISSG is part of The Bank of New York Mellon.

Minutes from the Federal Open Market Committee’s June meeting showed the US Federal Reserve hasn’t altered its expectation of an interest rate hike in the second half of 2015, while tapering is in line to be completed this October. Meanwhile, questions continue to be asked over the veracity of the US economy recovery. US employment numbers continue to impress while … read more

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The week that was…

In the week ending 3rd July, what stole the financial headlines?

US security dominated the headlines after US homeland security announced it was increasing aviation security amid new concerns about the capacity of al-Qaeda-linked groups to evade existing controls. The UK followed the US’ example. Meanwhile, the battle for Iraq rumbles on and following rumours that the Iraqi army had withdrawn from the Iraq-Saudi Arabia border, the Saudi government sent 30,000 troops to its frontier. In other news, President Barack Obama received an Independence Day message from the Kremlin as the Russian president, Vladimir Putin, called for closer ties between the two countries. Given the strained relations between the two powers since Russia’s annexation of Crimea earlier in the year, Putin’s message carried a remarkably conciliatory tone.

 

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 04/07/14. ISSG is part of The Bank of New York Mellon.

US security dominated the headlines after US homeland security announced it was increasing aviation security amid new concerns about the capacity of al-Qaeda-linked groups to evade existing controls. The UK followed the US’ example. Meanwhile, the battle for Iraq rumbles on and following rumours that the Iraqi army had withdrawn from the Iraq-Saudi Arabia border, the Saudi government sent 30,000 … read more

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The week that was…

In the week ending 8th May, what stole the financial headlines?

Pro-Russian rebels declared a resounding victory in referendums on self-rule in the eastern regions of Ukraine. The EU had denounced the referendums as illegal and moved closer to extending sanctions to companies, as well as individuals, linked to the annexation of Crimea. Meanwhile, the proposed £63bn bid by Pfizer for AstraZeneca triggered a political storm, with concerns about potential job losses.

Headline Hotlist & World/ Asset Returns Source: The BNY Mellon Investment Strategy and Solutions Group (“ISSG”) as at 12/05/14. ISSG is part of The Bank of New York Mellon

Pro-Russian rebels declared a resounding victory in referendums on self-rule in the eastern regions of Ukraine. The EU had denounced the referendums as illegal and moved closer to extending sanctions to companies, as well as individuals, linked to the annexation of Crimea. Meanwhile, the proposed £63bn bid by Pfizer for AstraZeneca triggered a political storm, with concerns about potential job … read more

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