Gary Greenberg, head of Hermes emerging markets, said that while Russia has ‘enjoyed a strong bounce’ through the first quarter of 2015 in rising 18.6% overall, now is not the time to be complacent.
There have been a number of catalysts in recent months which explain this performance Greenberg noted. These include American acquisitions of Veropharm and Eurasia Drilling.
A circa 20% recovery in the oil price since January has also helped, as has the Ukraine peace deal agreed in Minsk in February, he noted.
While there are clearly some reasons for optimism on Russia’s prospects, investors need to proceed with a large dose of caution still, according to Greenberg.
“Russia will be in recession this year and probably next, with inflation in double digits and foreign currency reserves declining, though still high. Sentiment may improve if the Minsk deal holds and sanctions are lifted, but Russia will not attract significant investment in the medium term, even if Putin hands back Crimea tomorrow.”
“The long-term outlook for Russia is cloudy,” Greenberg added. “A change in political leadership or a strong oil price spike would be major catalyst to the upside. Failing this, the upside would have to come from sleight of hand.”
