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Strategies & Market Trends : Investment in Russia and Eastern Europe
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To: Tony van Werkhooven who wrote (270)7/6/1998 10:15:00 PM
From: Rob Shilling  Read Replies (1) of 1301
 
I know on Wall Street that there is a lot of what goes up keeps going up and what goes down keeps going down. But somehow I don't think Russia is going to be perpetually down and out.
Supposably Russia does not have a current account deficit so the ruble in theory at least is not overvalued. Basically Russia has a short term cash crunch that it is trying to fix.
The "smoking gun" has been the "cycle on nonpayment". But the new prime minister has been really good at working on the tax payments to break the cycle. If Gazprom follows through with what they promised, their taxes for July could be 2-3 billion rubles more than June. That comes a long way towards closing the budget problems. The government is also going after the oil companies and UES (electric utility).
Since the Duma has passed the tax legislature that the IMF was looking for, there is a good chance Russia is going to get an emergency loan in July. That should be enough to tide Russia over until the budget is fully balanced (the prime minister is shooting for November 1).
As for the markets, there has already been carnage. LUKOY and ROS are both below book value (ROS is 1/2 book value), yet they are both profitable and both have low debt.
With the Russian Blue chips so low, it just looks to me that this may be a rare opportunity to pick them up on the cheap.
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