Sunday, May 1, 2016

Russian stocks make new high


We finish our week-long trip around the equity world today with the piece de resistance, of sorts. Of all the country stock markets that we track in our database, just one traded at an all-time high this week. We are betting that not many folks out there would have guessed that that country is…Russia. Yet, here was one of the “Russian Bear’s” main stock averages, the MICEX Index, hitting a new all-time intraday high yesterday for the first time since 2007.

This really should not be a surprise for a couple of reasons. The oil price has bottomed and is now recovering sop this bodes well for the Russian economy and stock market. Quite a bit of Russia's economy is tied to oil and gas exploration.  In addition the ruble has been strengthening against the US dollar as have most emerging market currencies. This is especially good news for US dollar investors in Russian equities as the strong ruble juices prices for dollar investors. I expect Russia to continue to do well especially as I anticipate a higher oil price by year end. 

You may recall that Russia was the cheapest market compared to its CAPE ratio. The lower the CAPE the higher the return over 5-10 year periods. In case you missed it I wrote about it here.

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