Buy Russian! Investors line up for our papers

© RIA Novosti / Sergey Mamontovaya in photobacteria hall of Sberbank CIB in the main office of the savings Bank at the address: Moscow, Vavilov street 19Buy Russian! Investors line up for our papers© RIA Novosti / Sergey Mamontovaya the image Bank

After a two month break, international investors are again increasingly invest in the Russian stock market. This is evidenced by the analytical services Emerging Portfolio Fund Research. The main reason is the confidence of experts that Washington does not dare to tough sanctions against Moscow. Based on what the optimism of investors and as new market trends will affect the exchange rate in the material RIA Novosti.

A cold shower for congressmen

Now the us Congress is discussing two bills on anti-Russian sanctions: «Protection of election from threats by designating red lines» (DETER) and the «Act on the protection of U.S. security from the aggression of the Kremlin» (DASKAA).

In accordance with the DETER in the case of Moscow’s attempts to influence the election, the White house should authorize the largest Russian banks with state participation (the savings Bank, VTB, Vnesheconombank) and energy companies («Gazprom», «Rosneft», «LUKOIL» and others), as well as prohibit Americans buying Russian debt. DASKAA the bill also provides for sanctions against Russian banks and energy companies.

Recently, however, more and more experts believe that the most severe sanctions Washington will not be resolved because it will hit by the US and its allies. This, in particular, said the head of British Petroleum Bob Dudley at a meeting in mid-October in London conference Oil & Money in 2018.

«I don’t think it will happen, he said. — If «Rosneft», «Gazprom» or «LUKOIL» to impose sanctions on RUSAL, you actually disconnect the energy system of Europe. This is too much».

As for the ban on operations with Russian debt, as Bloomberg found out, most of this can hurt American firefighters. Analysts estimate that Pension Fund public employees of California (California Public Employees’ Retirement System — Calpers) for the year increased its investments in Russian government bonds at eight percent to $ 460 million — and among the ten largest U.S. holders of Russian debt.

«Pension funds, who bought Russian debt is likely to oppose sanctions against sovereign bonds and put the matter before the Ministry of Finance of the USA,» said a senior investment analyst at Union Bancaire Privee kun Chou.

Even one of the authors of the bill to DETER Senator Chris van HOLLEN acknowledged that «concerns about government bonds is the main obstacle for the approval of this document in Congress.»

In addition to pension funds, the largest investors in Russian government bonds are the company BlackRock (2,526 billion), GAM (997 million), Stone Harbor (586 million), Allianz (576 million) and many others. Experts believe that their lobbying capabilities will significantly cool the ardor of the sanctions us lawmakers.

«We expect that any sanctions laws would considerably lessen compared to the current proposals», — noted in last week’s report, the political consulting firm Eurasia Group.

Analysts indicate that on 5 October, us Office of foreign assets control once again postponed the imposition of restrictions on operations with securities of RUSAL and En+ group. Now this date is postponed from 12 November to 12 December.

Washington officials had to listen to the complaints by American steelmakers, faced because of the sanctions with the sharp rise in prices for alumina — the main raw material for aluminium production, the largest supplier of which «RUSAL».

Russian is not their fault

Last week, the authors of the sanctions bills unexpectedly lost one of the main arguments. Facebook published the preliminary results of an investigation regarding a hacker attack on the social network that led to the leak of personal data of 30 million users.

It turned out that the attack was organized not by «Kremlin hackers», as claimed by the American media, and a group of spammers, which calls itself «a company operating in the field of Internet marketing.»

According to Facebook, 15 million users only stole data, including name, mailbox and phone number. The remaining 14 million additional information: gender, religious affiliation, location, device information, any page and the place in which they were marked.

«Hackers were chasing financial targets, not ideological,» — said representatives of the company the Wall Street Journal.

We will add that at the end of last week, the office of the Director of National intelligence, the Department of justice, Federal Bureau of investigation (FBI) and the Department of homeland security issued a joint statement about the absence of «evidence of tampering, or obstruction of the electoral infrastructure that would allow the opponents of Washington to affect the outcome of the midterm elections on 4 November».

Thus, the hype surrounding possible intervention of Russia in American elections has declined, which drastically reduces the likelihood of harsh sanctions. And investors ‘ greed prevailed over fear.

Growth potential

After the summer wave of sales caused by the introduction of bills to Congress to DETER and DASKAA, Russian assets were among the most undervalued in the world. In particular, domestic oil and gas companies by the ratio of the value of shares to income two to three times inferior to Western competitors.

Thus, the total value of the shares of ExxonMobile at 16.6 times the income of the company, and for Gazprom, this figure is only 5.1, for «LUKOIL» of 6.9. That is, Russian stocks a huge growth potential.

«The Russian stock market today is very cheap and can bring in more revenue than any other», — said ABA Sheikh, chief investment officer of American management company, Cougar Global Investments. He stressed that the Russian ruble has good potential for strengthening, and this can bring investors extra income.

The hopes of the experts on the strengthening of the ruble is associated with the almost inevitable rise in oil prices. «If November 4, the day of new sanctions against Iran, it will become clear that the United States administration strictly to apply them, then the price of a barrel of crude oil will be at least five dollars, and we may be near the mark in 90 dollars», — said the former chief of staff of the U.S. Department of energy Joe Mcmonigle.

«As the price of oil is likely to continue to rise, the Russian currency will also rise in price, — said ABA Sheikh. At least the ruble will weaken».

According to experts, high oil prices will further stimulate the interest of investors to Russian assets. Therefore, in the coming weeks, market participants expect growth of quotations of shares of domestic companies and the strengthening of the ruble to the level of 60-61 per dollar.