Strengthening of trade wars combined with protectionism growth all over the world as well as the termination of the “Russia investigation” conducted by special prosecutor Robert Mueller led to Russian sanctions issue fading from the picture in the second quarter of the year.  This allowed the Russian market to show good growth despite some lowering of oil prices. The MXRU index and Russian Federation First Mercantile Fund grew by 14.4% and 10.7% bringing their YTD performances to 28% and 27.65% respectively.

Today, in our opinion, the Russian market is attractive with a good potential for further growth because it continues to be the cheapest market among its peers with P/E ratio equal 5.6 and has a dividend yield 6.6%. That is why some Russian companies launched buyback programs for bonds and shares. Only Lukoil spent $ 2.9 billion and bought 4.88% of its shares. Another Russian large company Gazprom after YTD share price growth of 75% continues to have net dividend yield equal 5.5%.

Despite the fact that the Economic growth in the first quarter of 2019 was lower than the Bank of Russia’s expectations (0.5% vs 1.2%), overall Russia’s macroeconomic measures remain strong, with fiscal surpluses across all tiers and low public-debt level ($ 466.9 bln).  At the same time, Gold and Forex Reserves increased by 10.7% in the first half of the year and exceeded $ 517bln.

Source: Bloomberg LP, AP Asset Management Ltd

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