Is Russia a Cheap Opportunity or a Value Trap?

The Central Bank of Russia forecasts the nation’s GDP to fall by about 4.5% this year and by 0.9% in 2016 - and the recession could worsen when sanctions start to seriously bite

Hermes 4 February, 2015 | 8:25AM
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Morningstar's "Perspectives" series features investment insights from selected third-party contributors. Here, Gary Greenberg, Head of Emerging Markets for Hermes evaluates whether Russia is good value or a value trap.

In 2014, the Russia index in dollars was down 48.5% – the worst return among all major indices. Does the market represent value at this level, or a value trap? Is this a fantastic buying opportunity, or have Putin’s actions permanently deterred foreign direct investment?

Six months ago, Vladimir Putin was seen as a grandmaster of geopolitics, having outmanoeuvred Obama in Syria, grabbed Crimea, and signed a 30-year energy deal with China. Today, with the rouble at about 67 against the dollar – compared with 33 in the summer of 2014 – and the Russian economy sinking, he looks more like a man out of his depth.

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About Author

Hermes  Hermes is a multi-asset fund manager offering global institutional and pension fund clients access to a broad range of specialist, high conviction investment teams.

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