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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: baystock who wrote (453)	8/17/1998 9:36:00 PM
From: Rob Shilling	Read Replies (1) \| Respond to of 1301

Well, it happened, but it is not being called a devaluation by Russia. More confusing is that the official ruble rate just rose to 6.41. I guess we have to wait a few days to see where it settles at. I am surprised that the market couldn't rally on the news (sell the rumor, buy the fact). Down 90% from the peak at one point on Thursday, I don't see why anyone would sell. The devaluation will help the oil companies. It also seems to be the answer to help balance the budget and pay back wages. I guess it is kind of like punishing the populace for not paying taxes. The devaluation reduces the value of the population's money and puts extra money into the government coffers so that it can redistribute it to people who have not been payed for months. So, on that note, the budget and back wage problems could be fixed fairly soon. Then, what are the markets going to complain about ?? Yes, the economy could contract more, but there has to be a lot of pent up buying demand by all the people that are owed wages. I guess if Mexico is any example, after devaluation it is time to buy the country's stocks. I would guess we have seen the low on the commodity producers. ROS and VIP and took big hits today though and I am not sure if they have bottomed. Though with a 30% devaluation, ROS's trailing PE goes to a little over three, not exactly a reason to sell. It would be interesting to see Russia adopt Hong Kong's strategy of intervening in the equity market. With a market cap of around $17 billion, an intervention could really move prices. The speculators really have had a riskless situation. Efficient markets are supposed to "price in" bad news and not necessarily go down on every negative tidbit of bad news.