Russia’s Retail Boom Lures Aberdeen to Micex-Beating Magnit

Aberdeen Asset Management Ltd. is investing in OAO Magnit, Russia’s largest retailer, as the economy’s expansion boosts consumer spending and spurs the best performance on the benchmark Micex Index.

Magnit has surged 31 percent in 2012, beating the Micex’s 1.4 percent advance. That pushed the valuation to the highest level this year at 26 times estimated earnings on July 13.

Aberdeen’s Russia-dedicated fund holds 31 percent of its assets in energy stocks and 25 percent in consumer companies, according to Peter Taylor, senior investment manager at Aberdeen Asset Managers Ltd., who manages about $1.5 billion in Russian equities.

“What we’re trying to build is an exposure to Russian growth, in particular, the growth of consumption, growth in the domestic economy,” Taylor said by phone July 13. “Our conviction has always been quite high” on Magnit, Taylor said.

The economy of the world’s biggest energy exporter expanded 4.9 percent in the first quarter from a year earlier as consumer spending boosted retailers, according to Federal Statistics Service data. Real wages increased as fast as 12 percent in the first three months as inflation slowed and the government pushed more of its annual spending to the front of the year. Retail sales grew 6.8 percent from a year earlier in May.

Magnit posted a 34 percent sales increase last month as it opened 109 new stores in June. The stock pared declines of as much as 2.3 percent to trade down 1.2 percent at 3,691.30 rubles by the close in Moscow.

MTS, Synergy, O’Key

Aberdeen also holds shares in OAO Mobile TeleSystems, Russia’s biggest mobile operator, OAO Synergy, the Russian vodka maker, and supermarket chain O’Key Group SA, Taylor said.

“The way we play the Russian market is to not to take a position on commodity prices,” Taylor said. “What we’re trying to do in the Russian fund is avoid it being excessively oriented towards oil and gas companies and excessively oriented towards commodity stocks.”

Out of 30 stocks on the Micex Index, seven are non-commodity or energy producers. Aberdeen holds shares of OAO Rosneft and OAO Lukoil, Russia’s largest oil companies, and potash producer OAO Uralkali, Taylor said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE