“Our models are telling us to buy Russia,” the agency quotes Tim Love, a London-based investment manager at GAM UK Ltd, which oversees $130 billion in assets, as saying. “There is a very strong turnaround potential. It’s an increasingly difficult call to get right because of politics. I’d be happy to pull the trigger in the next two to three months.”
Russia’s stock, however, remains undervalued compared to that of other BRICS member states. The Micex trades at 5.9 times the projected earnings of its members, compared with the second cheapest gauge, Brazil’s Ibovespa, at 12.6. China, India and South Africa enjoy multiples of above 15.
“Most Russian stocks are fundamentally undervalued,” Bloomberg quotes Mattias Westman, the London-based founder of Prosperity Capital Management, which oversees about $2 billion in assets from former Soviet republics including Russia, as saying. “There is potential for further recovery.”
Cheaper valuations remain the key argument in favor of Russia for now, but Tim Love calls the market “a spring.”
“You’ve got to continue pressing on the spring to keep the valuation low,” he explained. “It’s not where Russia should be.”