Currently, Vladimir Putin is considered the most successful virtuoso of the geopolitics on the planet. But what the President of Russia, with all its political success has always lacked is talent in relation to financial markets. Investors and speculators did not support Putin and his hard line that was due, in particular, imposed by the West sanctions.
But now the master of the Kremlin convinced and global investors. They strongly buy both shares and bonds. At the latest, after the victory of Donald trump in the presidential election in the United States and the success of françois Fillon (François Fillon) in the primaries the conservatives in France disappeared last doubt. With both policies, the Kremlin’s hopes for political detente and the lifting of sanctions.
In the middle of the week the Russian stock MICEX index reached a historic high. From the beginning, the barometer of the market grew by more than 18%.
Even bigger the profits of the RTS index, which reflects the situation of the most important Russian shares denominated in dollars. As the ruble this year has been considerably strengthened, RTAS 34% exceeded the figure observed at the end of December.
Hope for relationships trump-Putin
First of all, Western banks are downright euphoric respond to changes in the global weather situation after the victory of trump. “Sanctions, what sanctions?” says Deutsche Bank, and informs its clients that the new U.S. President can in one fell swoop to lift the sanctions, and most importantly, it does not need approval of Congress. “Relations between Russia and the United States probably will be normalized”, — writes an employee of Deutsche Bank Elina Rybakova. According to her, after Bulgaria, Italy, Austria and Hungary more and more countries in Europe will strive for a normal relationship. It also made a change of course in France, if the spring Fillon will win the presidential election. On Wednesday, Putin praised the good personal relations with Fillon, which is a “genuine person”.
“The Russian market benefited from the changes,” says a strategist at Bank of America Merrill Lynch Karen Kostanyan (Karen Kostanian). He recommends to give more weight to how Russian stocks and bonds. Thus, Russia is once again under the protection of investors. Forgotten are the days when summer Putin had difficulty attracting investors for dollar-denominated bonds in the billions.
Meanwhile, the quotation of securities is much — 100% — increased in comparison with the emission rate. Financial markets have again started to have more trust in Putin. The probability that in the next five years the country will become insolvent fell by one percentage point and amounted to 14% after trump has achieved success.
However, most of the participants of the rally came not so much from a favorable fundamental dates, how much of the hope for improvement. “2016 was the best for the Russian stock exchange for many years, — said Vyacheslav Smolyaninov, chief analysts of FG BKS. — Lacks facts.”
The fact that so far the Russian stock exchange was going through bad times, and for a long time, was due not only to falling oil prices and Western sanctions. This was due to domestic and structural crisis that has been raging since 2012, because the old growth model has outlived its usefulness, and opportunities for new investment-based models do not exist. In 2015, GDP declined by 3.7%. The bottom of the crisis seems to be passed. The world Bank predicts by 2016 a growth of 1.2%.
Now populism is decent phenomenon investors
Pessimistic saying that the country is on the verge of economic collapse, were deprived of any grounds. The amount of external debt is small. The country has a relatively high coverage of imports, foreign exchange reserves amount to $ 400 billion. The international monetary Fund is also a well-appreciated Russia’s efforts to combat the crisis. To a large extent the success in this fight determined the intense devaluation of the ruble.
However, in the coming years, experts expect weak economic growth. If you compare that, then the market ahead of real developments. According to the analyst Smolyaninova, the more important offensive in a short time a real improvement of the situation with income and turnover of companies in order to “already high expectations” were met. He believes that Russia is still not waiting for any geopolitical deterioration, because the funds are beginning to configure their investors to Russia. Smoljaninov believes that the potential of the quotes this year have exhausted themselves, but in the first half of 2017, in his opinion, possible plus 10 to 15%.
Observers believe that the presidential election in 2018, the economy will not receive the impulse from the domestic policy, because such a pulse implies the adoption of unpopular measures. But IFC Markets analyst Dmitry Lukashov considers that the Russian stock compared to securities of other transition economies remain undervalued. Namely, it is betting investors.
Big capital is rediscovering Putin. Once the master of the Kremlin also enjoyed the favor of investors. It began to be perceived as a true reformer soon after coming to power at the turn of the Millennium. It lowered income tax to a marginal 13% and caused thereby a real hyperrust. Incomes grew. Fueled by success and the rising price of oil and gas. Minerals provided the Treasury $ 1.5 trillion.
Only Putin’s transformation into a populist, which also contributed to the demise of economic reforms brought down the investors confused. Now that victory trump populism from investors is decent, and Putin seems to be again partially rehabilitated.
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