Investors who have ignored international sanctions against Russia are being rewarded.
The CHART OF THE DAY shows the MSCI Russia Index of stocks has gained 22 percent, adding about $90 billion in market value since March 17, when the U.S. banned President Vladimir Putin’s business allies in response to his annexation of Crimea. MSCI’s emerging-market gauge jumped 10 percent during the period, while the Standard & Poor’s 500 Index rose 2.9 percent.
Russian stocks have rallied as the U.S. and European Union refrained from extending penalties beyond officials, individuals and companies tied to the Kremlin’s inner circle. Putin this week said he ordered troops to withdraw from the border to help ease tension ahead of a May 25 presidential election in Ukraine.
“There was a significant amount of fear in the market, but it is clear that the actual sanctions were nothing very dramatic,” Ian Hague, founding partner of New York-based Firebird Management LLC, which manages $1.1 billion of assets including Russian stocks, said in a phone interview on May 21. “In every crisis, there’s an opportunity at some point.”
MSCI’s Russian stock gauge rose to a three-month high on May 21, trimming its decline for the year to 8.5 percent. The index traded at 5.08 times trailing earnings, a 59 percent discount to the emerging-market average, according to data compiled by Bloomberg. The average discount was 47 percent over the past five years.