Ben Aris: The Russia Story

What is so striking about the Russia story is its totally schizophrenic nature. The headlines are full of politics and it seems the mainstream press has invested every ounce of their energy into demonising Russia. But investors seem to love Russia (silently).

Russian retail banking stock Sberbank is a darling of portfolio investors, but until recently more investors held the stock of regional supermarket chain Magnit, which accounted for a third of the MSCI EM overweight by itself. That just changed following Magnit’s founder’s Galitsky’s decision to sell up. The politics may be horrible, but Russia is now the second biggest overweight in international EM portfolios.

I had to include this second and slightly geeky story as well. But its an important story as Russian investment grew for the first time in five years in 2017, according to the latest Rosstat figures. If Putin is going to keep the “butter” part of his state of the nation promises then Russia needs to grow faster. And if it is going to grow faster it needs to invest more. And it is. Trouble is the bulk of the investment is state-led. The private sector needs to get on board too. So we are not there yet.

We have a piece coming out tomorrow (Intl Women’s Day – don’t forget to buy the wife some flowers!) looking at the economic part of the speech. Bottom line is Putin promised more than he can deliver, but the emphasis has clearly switched to less guns and more butter.

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