How Good News from Belarus Could Mean Gains for U.S. Investors
By George Leong for Daily Gains Letter |
It began with the battle for Crimea, followed by the shooting down of Malaysian flight ML17 in eastern Ukraine, but for Russia, which was blamed for both, there has been a battle over the strength of its economy, triggered by a multitude of economic sanctions by Europe and the United States.
Russia, under President Vladimir Putin, has been in strong denial to all the blame it has received; but clearly, the world sees a different story, which is the reason for the economic sanctions. Now, these economic sanctions have begun to wreak havoc in the region, based on my economic analysis.
The reality is that Russia, based on my economic analysis, is not strong enough economically to survive on its own domestic consumption and ignore the global economy. Yes, Russia has its alliances with China, but it’s not enough, especially since the Chinese economy is also struggling to avoid a hard crash, as my economic analysis indicates.
Putin has had time to rethink his strategy and I’m sure he has had many phone calls from Russia’s business elite regarding the sanctions and their impact on their wallets. Heck, even Putin, who has major economic interests in Russia, is hurting at the bank.
Now there’s hope with a meeting between Putin and Ukrainian President Petro Poroshenko scheduled to take place in Belarus this week. Russian stocks have closed higher in 10 straight sessions as optimism rises and an end to the conflict could emerge following the meeting.
While the benchmark MICEX Index, which comprises the 50 most liquid Russian stocks that represent the Russian economy, is down 2.59% year-to-date as of Thursday, it is up 6.57% so far this month. The price-to-earnings multiple on the MICEX is only about six, which is well below what we see here and in other industrialized countries, according to my economic analysis.
I hope there are some grounds to expect an end to this conflict, as this would open up some good opportunities for American investors to make money.
To play a potential rally on Russia, investors may want to take a look at some exchange-traded funds (ETFs) like the Market Vectors Russia ETF (NYSEArca/RSX), iShares MSCI Russia Capped (NYSEArca/ERUS), or the Market Vectors Russia Small-Cap ETF (NYSEArca/RSXJ) for exposure to small-cap stocks.
Tags: China, economic analysis, ETFs, global economy, small-cap stocks
