“Almost all love Russia and want to stay as far away from Turkey,” describes the Bloomberg consensus forecast of investment banks in 2017. Investors are betting on the fact that Russia is more among all developing countries would benefit from joining the White house, Donald trump. The rise in oil prices will support the ruble, which as of 28 December is the most profitable currency in the world.
The Russian currency promises great opportunities for deals carry trade (the earnings on the difference in interest rates. — ) in EMEA in the next 12 months, says UBS Group. The potential profitability of such operations with the ruble — 26 percent, estimates the Bank. Danish Danske Bank predicts that by the end of the first quarter the dollar will cost 60 rubles, and by the end of 2017 will drop to $ 53,20 RUB based on the price of Brent crude to $59 in the fourth quarter of 2017.
As at 15:00 GMT on Wednesday, 28 December, the ruble has been the best currency of the year in the world: the strengthening of the dollar since the beginning of the year was 21.5% (in second place — the Brazilian real from 21.1% growth), follows from the data Bloomberg terminal.
The capitalization of the Russian stock market since the beginning of the year to 27 December increased by 50.5% is $584 billion, follows from the data terminal. But still it is less than the capitalization of only one company, Apple ($625 billion). Russian shares — “an obvious candidate” for foreign investment in 2017, says Dutch management company NN Investment Partners. The rise in oil prices, the strengthening ruble and inflation easing will be the impetus for the Bank of Russia to lower the rate, says Manager Nathan Griffiths (his words are quoted by Bloomberg).
Exchange traded funds ETFs focused on Russia, in 2016, showed some of the best results. According to the provider of information on such funds XTF.com the ten most profitable ETFs investing in equities of specific countries, included Direxion Daily Russia Bull 3x Shares (+119% since the beginning of the year, second place), VanEck Vectors Russia Small-Cap (+103%) and iShares MSCI Russia Capped ETF (+53%).
Surprises and risks
The investment community praised the economic policy of Russia in 2016, said Finance Minister Anton Siluanov on December 23 press briefing. The ruble is one of the most popular currencies at decreasing its volatility, capital outflows from the private sector for the year will be the lowest over the last five years, and the cost of borrowing for the government has declined to 8.4% from levels above 10% per annum in the beginning of the year were mentioned by the Minister. Wednesday, December 28, the Ministry of Finance placed this year’s last issue of OFZ bonds for 10 billion roubles with an average yield of 8.3% per annum.
In 2017, the Russian economy may surprise on the positive side, growth could reach 1.5% (with basic government forecast of 0.6%), the Finance Ministry said.
Deutsche Bank recommends in 2017 to be put on the Russian government bonds, believing that Russia will benefit from improved relations with the United States at the trump. In 2016, the Russian ruble-denominated debt offered investors income at 35.7%, the second best figure in the Bloomberg Emerging Market Local Sovereign Index, after Brazil (data as of 15:00 GMT on 28 December).
Investors see Russia as a “haven” among emerging markets, agrees the chief economist of “Renaissance Capital” in Russia and the CIS Oleg Kuzmin. “We believe that the price growth potential of Russian local bond more than the internal bonds of other developing countries, given the expected further decline in inflation and reduction of interest rates by the Central Bank. For stock prospects are also quite good — yet the economy next year will show growth after two years of recession,” he says. More difficult is the case with Eurobonds — they are, says Kuzmin, will move “in the same direction as bonds of other developing countries.”
But there are risks, says the economist. First, is the fall in oil prices. There are risks in connection with possible sharp changes of rate of FRS of USA. If she grows up to within a percent, Russia will react to it neutrally, but if growth is significantly above the consensus forecast, it can have a negative impact on the Russian economy, says Kuzmin. Among domestic risks, the analyst points to a possible violation of the strategy of fiscal consolidation and, as a consequence, the preservation of the deficit at a consistently high level. The rouble can fall in price, if the deal OPEC and countries outside the cartel, to reduce oil production will not be realized, warns Danske Bank economist Vladimir miklashevskii.