7/9/98 article. Investing in Russia. Moscow moves toward next bull run. Autos, telecoms picked as next hot sectors
cbs.marketwatch.com
By Margaret Coker, CBS MarketWatch
08:42 PM July 09, 1998
NEW YORK (CBS.MW) -- Less than six months after the global stock
market meltdown, emerging markets are regaining their luster in the eyes
of international investors, and analysts predict Russian stocks are again
ready to rise.
Moscow's blue-chip Russian Trading System 105-share index has lost
about 40 percent of its value since October, but analysts say the
downward pressure seems to have eased, leading to forecasts of another
bull run for the market that posted gains of more than 140 percent in both
1996 and 1995.
"Russian stocks may finally be ready for a breakthrough," said Jeffrey
Hyde, an equities analyst at Moscow's OPM Bank. "While Russian
stocks stayed in neutral, major international markets have performed very
well over the last month. As this disparity grows . Russian stocks look
even cheaper than before."
"Russian
stocks may
finally be ready
for a break-
through."
Jeffrey Hyde
OPM Bank
The recovery of other markets around the world has given the big guns
the confidence to invest in Russia, and many large players appear to have
been sizing up the playing field, Hyde said.
On Wednesday and Thursday, managers from mutual funds like Lexington
Troika Dialogue Russia Fund (LETRX), Morgan Stanley's Russia Fund
(RNE) and Templeton's Russia Fund (TRF) are hobnobbing in New
York at a conference on investment opportunities in Russia.
Risky business
Prices of Russian stocks shrank rapidly at the end of 1997 as mutual
funds and individual investors fled emerging markets and stashed their
money in safer havens to wait out the aftershocks of the Asian crisis.
"Proof of
continued
economic
growth despite
the Asian
turmoil has
shown Russia
is proving its
mettle as a
contender."
Philip Eastlake
Deloitte & Touche
The country's economic recovery appeared ready to crumble at that time,
but by the end of the year the government reported real growth in the
gross domestic product for the first time since the break up of the Soviet
Union, a tame interest rate of 12 percent and a rebound in industrial
production.
"Proof of continued economic growth despite the Asian turmoil has shown
(investors) that Russia is proving its mettle as a contender" among the
ranks of other emerging markets, said Philip Eastlake, the director of
corporate finance at Deloitte & Touche's Moscow office.
Hyde predicts that after the New York brainstorming session portfolio
investors, which comprise the largest amount of money entering Russia,
will re-enter the Moscow markets in the next week or two. So, individual
investors looking for bargains should act soon, he said.
"Investors may not be ready to fully commit to Russia, but they are likely
to increase their exposure or risk being too late" in getting in on the ground
floor, he added.
Before big fund money starts pushing up stock prices in Moscow, CBS
Marketwatch has compiled a tipsheet for the individual investor about
which companies to buy, and which to avoid, in search of a bargain.
Analysts agree investors should avoid the oil sector until world crude
prices rebound. Good values can be seen in the auto industry and Russia's
telecoms, they said.
Margaret Coker writes about Russia from the CBS MarketWatch
bureau in Washington.
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