A Margin of Safety in Russian Equity Prices: Koch

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March 18 (Bloomberg) -- Katie Koch of Goldman Sachs Asset Management talks with Francine Lacqua about the risks of investing in Russia during the Ukraine crisis and her view of emerging markets on Bloomberg Television’s “On The Move.”


What is your take on this?

This is a very fluid situation with a broad range of outcomes.

We don't advise our clients on policy, but we do have to advise them on the economic and investment applications.

We do have russia exposure in our emerging markets, but they're very diversified portfolios.

We are sticking with the positions.

You can say at not if economic sanctions are severe, there will be extreme trade and investment disruptions in russia.

On the other hand, if you take a step back and look at equity market valuations, they haven't been this cheap since the 1998 russian crisis.

That was at a point where the country was going to default on its debt and devalue the ruble.

We are very far from that scenario.

I'm not saying that low price means great value, but there's clearly a margin there.

You see little market correction.

We see little correction in emerging markets.

First of all, a lot has been priced in already.

It has been ages appointing year.

Taking a step back, we still do like emerging markets.

We think investors should keep an eye on them.

I would say the bigger issue is that we have had this rising tied for a long time.

A pundit liquidity from the u.s.. as that tied receipts, it is going to become more and more important to pick your countries in emerging markets and pick them well.

Are the markets aware tackle people expect tapering to continue.

Because we have had some difficult data to read into, do you think there is uncertainty in the market?

I actually do think so.

I think there'll be volatility over the next coming months and quarters.

I think it creates great opportunity to pick specific countries.

Some are going to be really foldable.

I put turkey and south africa in that pocket.

Others have sound economic fundamentals are out mates with policy decisions.

I put mexico and maybe india in that pocket.

They look attractive to us.

Tell us about japan.

We talked about two months ago.

The little bit disappointing?

Clearly, market performance has been disappointing.

I think a lot of exogenous factors have been at play.

Historic japanese equity has always been at issue.

What you've seen in this year is heightened risk aversion.

That is bad for japanese equity markets.

However, we still think this is a great position to have any portfolio.

We believe that the bank of japan will stay on an easing stance.

Therefore, we think japanese equity markets continues to be a great position to have.

What is your equity -- richard take on the equities in europe?

There certainly a race among high street retailers.

People want value.

It is quite important to position yourself.

When you look at their earnings season for europe, i would say that the fourth quarter came out relatively in line.

Revenues were a little bit disappointing, but you had some great operating leverage.

That is quite encouraging.

When you look at 2014, it looks pretty weak.

You have exogenous and the mystic factors.

Regional emerging markets are bad for european equities.

Revenues are coming from emerging markets.

The other thing at play is a strong euro.

Actually, this is something we are concerned about for european corporate rate when you look at it on a trade basis, the euro is at an all-time high.

This is a real concern for european corporate.

Taking a step back, we are pretty positive on european equities because we do think that chance for emerging extension is very attractive and it doesn't exist in the u.s.. close look like positive.

It is a great market for stock pickers.

Every day we talk and got a new ipo or a new merger or acquisition.

As a mean ceos are more confident about taking risks?

As equity grows, the fundamentals mechanism of stocks and the ratios are not really working to the full extent that they should have.

Actually, this is a critical point.

You had a lot of cast on -- cash on balance sheets but the inability to spend the cash on growth for two different things.

The missing link has been ceo confidence.

We are absolutely seeing that turn.

The ones we like are poised for growth, the ones that will be engaged in m&a or the ones engaged in catholics -- in cafx.

You know that investors are rewarding companies that are investing for growth.

Katie, thank you so much for your advice.

We'll be talking about her latest report, giving credit where it is due next.

Coming up, richard man is avoiding the u.s. and setting his sights on china.

We will look at who's mine off -- at usmanov's new strategy coming up.

This text has been automatically generated. It may not be 100% accurate.


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