It is time to buy back into the Russian stock market?
Today's Financial News - Posted May 21, 2009
Rising crude oil prices virtually guarantee a higher exchange rate for the Russian ruble: Time to get back into Russian stocks… or at least Market Vectors Russia ETF (NYSE:RSX)?
by J. Christoph Amberger
Baltimore—TFN: American hard-money gurus are rubbing their hands again. Looking at an abyss of unrepentent borrowing and irresponsible government debt, the U.S. dollar has again been losing ground against the world’s major currencies.
But those concerned with the competitiveness of their respective economies abroad are less thrilled. A cheap dollar relative to their native currency means no end of headaches.
It’s bad enough when economies are booming. It’s murder when they’re in the dumps.
Take Russia. The ruble has appreciated 15% against the dollar since January, clawing back from its 35% devaluation against the dollar in the last half of 2008. And it’s eating into the competitiveness of non-energy industries in Russia. Locally produced goods are increasingly becoming less competitive against imported goods—especially those enjoying a low-dollar peg like China!—while pushing up ruble-denominated production cost.
In this case, the resurgence of crude oil prices is making things even less comfortable: Urals crude oil is Russia’s main export earner. As oil prices move higher, the ruble is bound to follow. Expensive oil and less competitive industry create a situation that could be compared to a heavy-set Don Cossack doing the splits without proper warm-up.
But no pain, no gain. Having one money-making industry whose profits can bankroll domestic consumption beats a redistributionist government trying to strangle what’s left of private enterprise.
Sure, there are risks associated with Russia. Russian banks are plagued by non-performing loans. And with Putin pulling strings in the background, there’s always the possibility of yet another military adventure that could wipe out the Russian stock market. But oddly enough, Russia is more Capitalist these days than the United States. I’d venture a discrete bet on Market Vectors Russia ETF (NYSE:RSX)… ideally around $20. It currently trades at $21.53… Guess that’s good enough.
I think RSX could hit $30 before July is over.
Next Article: OpenTable IPO: You paid how much?
Be the first to leave a reply.
Your comments are welcome
Follow TFN via RSS or Twitter |
 |
 |
 |
Advertisement
Latest Headlines
- The Big Picture for Sinobiopharma, Inc. (SNBP)
- Beazer Homes USA, Inc. (BZH) and Hovnanian Enterprises, Inc. (HOV) up despite horrid housing news
- The FDA catalyst: 2010 moves in MannKind (MNKD), Roche Holding (RHHBY), Acorda Therapeutics (ACOR) show it still works!
- Steepest drop since Feb. 2009: Here we go again!
- Is the silver run over? Coeur d’Alene Mines (CDE), Silver Wheaton (SLW), Alto Group (ALTO), Hecla Mining (HL), Endeavour Silver (EXK) close down