Russian stocks will benefit at the expense of equities in Turkey and South Africa as their lower valuations lure investors as global risk appetite returns, according to Aton LLC.
Russia’s 30-stock Micex Index trades at 5.7 times analysts’ earnings estimates for member companies, while the ratio is 11.3 times for South Africa’s MCSI Index and 9.5 for Turkey’s MCSI Index.
“Russia is currently in a sweet spot to receive rotation of funds out of Central and Eastern Europe, Middle East and Africa’s two major markets, South Africa and Turkey, and hence relatively outperform,” Aton analysts led by Peter Westin wrote in a research note e-mailed today.
Materials and finance companies including OAO Mechel, Evraz Plc, Yandex NV and OAO Magnitogorsk Iron & Steel, which have consistently outperformed in previous rebounds, stand to benefit, according to the report.
Coal producer Mechel’s American depositary receipts tumbled the most since Dec. 19, falling 6.8 percent to close at $10.68 in New York. Yandex, operator of Russia’s most popular Internet search engine, slipped 3.9 percent to $21.27.
Russia still faces long-term economic problems which have “severely” intensified its dependency on oil, while this year’s presidential election may bring “market destabilizing surprises,” according to Aton.
Energy sales contributed almost 50 percent of Russian government revenue last year.
Prime Minister Vladimir Putin is running for his third term as president after having to leave the position in 2008 because of a constitutional limit on more than two consecutive terms. Protesters have taken to the streets of Russian cities after his United Russia party won a reduced majority in parliament in a Dec. 4 vote amid allegations of ballot-box fraud.