Investors ignoring geopolitical risks to target undervalued Russian equities -analysts

Fix Price

15/03/2021 10:53

* Russian assets undervalued - analysts
    * Global liquidity boost supports Russian equity offerings 
    * Investors largely ignore geopolitical risks - analysts,
bankers 
    * MOEX stock index hits all-time high

    By Alexander Marrow
    MOSCOW, March 15 (Reuters) - Russian companies are cashing
in on a global equity boom, leveraging growth potential and low
valuations as investors largely ignore geopolitical risks and
the risk of further sanctions on Moscow, analysts and bankers
said.
    Russian gold miner GV Gold on Monday became the latest local
company to announce plans for an initial public offering (IPO),
following e-commerce firm Ozon's  OZON.O  Nasdaq listing in
November and retailer Fix Price's  FIXPq.L  in London in March,
when M.Video  MVID.MM  also made a secondary public offering
(SPO).  urn:newsml:reuters.com:*:nL1N2LD0BK urn:newsml:reuters.com:*:nL8N2IA1SO 
    "There is an understanding that you need to look to emerging
markets for returns and Russia, on average, is cheaper than many
others," a senior banker working on Russian deals said. "And
there is a feeling that political tensions are easing, markets
do not expect major sanctions."
    Western nations have imposed sanctions on individuals over
the poisoning and imprisonment of Kremlin critic Alexei Navalny,
but have stopped short of targeting sovereign debt, which would
be more damaging for Russia's economy. 
    And although the rouble has come under pressure, stock
markets have largely shrugged the move off, with the benchmark
MOEX index soaring to a record high of 3,596 points on Monday.
 urn:newsml:reuters.com:*:nL8N2KB228
    Slava Smolyaninov, chief strategist at BCS Global Markets
says this is evidence of the two different narratives -
geopolitical risks and investor money - not talking to each
other much.
    "Money talks and with that in mind, follow the flows, see
what investors are doing. Politics and other things, up to a
certain point, can be quite detached from the stock market and
financial market realities," he said. 
    The Kremlin says it has seen no evidence Navalny was
poisoned. 
    Based on the price-to-earnings ratio, Russian stocks'
discount to their emerging and developed market peers has
widened from 2020 levels this year, returning to the historical
average of around 50%, Gazprombank strategist Ilya Frolov said.
    "Interestingly, this valuation discount persists despite the
changing market structure. This may be a result of the
geopolitical premium," he added. 
    Meanwhile, Stanislav Yudin, equities analyst at ITI Capital
says investors are eyeing growth and returns, despite volatility
in the price of oil, Russia's major export, and the risk of
sanctions.
    "In some cases Russian stocks are in a position to deserve a
premium to their peers given superior growth and profitability
profiles," Yudin said.
    Gazprombank's Frolov said the retail, telecoms, utilities
and metals and mining sectors are undervalued. Others say that
companies developing IT are also on investors' radar.  


 (Reporting by Alexander Marrow; additional reporting by Olga
Popova
Editing by Katya Golubkova, Kirsten Donovan)
 ((alexander.marrow@thomsonreuters.com;))