Sberbank Investment Research Announces RF, Turkey Strategy Overview
OREANDA-NEWS. October 31, 2014. Sberbank Investment Research, the research department of Sberbank CIB, releases Russia and Turkey Strategy research report which combines local expertise in Russia and Turkey to compare and contrast the two markets, highlight complementary themes and identify the most attractive investment opportunities.
Russia and Turkey Strategy is part of Sberbank Investment Research’s new product offering following the incorporation of DenizBank’s institutional equity product into Sberbank CIB. This is the first product produced collaboratively by the integrated team; jointly prepared by Kingsmill Bond, Chief Strategist and Sinan Goksen, Chief Turkish Strategist.
Sberbank Investment Research continually strives to expand its expertise and, as a result of the integration, will now cover 35% of the MSCI EMEA region, compared to 26% previously. New products provide Sberbank Investment Research clients with an additional service to support them in making investment opportunities across a wider variety of emerging markets.
Kingsmill Bond commented, “The collaboration between Sberbank Investment Research and DenizBank research team will raise the bar in terms of the quality and scope of our emerging European research. Drawing upon both teams’ deep market expertise, this new proposition will allow clients to make informed investment decisions and unlock the potential growth in some of Europe’s most exciting markets.”
The key issues examined in the first Russia and Turkey Strategy survey include:
The impact on the two markets of rising U.S. rates, coupled with macroeconomic trends such as a strong dollar, lower oil and weaker emerging markets in general.
Domestic factors which may enable each market to break free from external drivers.
Which stocks and sectors outperform under these circumstances relative to their own market and relative to their country peers.
Specific outperformance trades across nine separate sectors.
The key points of differentiation and similarity across the two markets.
The main links between the markets and how they will evolve.
Key findings of the research report:
What drives the markets: There are four key market drivers: oil and politics in Russia, and federal fund rates and politics in Turkey.
Trading opportunities: The last 14 years have seen a spectacular seesaw of relative performance between the two markets, with 18 occasions on which one outperformed the other by more than 30% over a sustained period.
Valuation gap: Russia trades near its highest valuation discount to Turkey in terms of the market as a whole (50% discount on P/E and 60% on P/BV), as well as key sectors, such as banks and retail.
Both markets are at risk from deteriorating GEMs: As high-beta markets driven by commodity prices and foreign capital flows, both Russia and Turkey are vulnerable to the continued fragility of EM in light of weak growth in China and a strong dollar.
Turkey enjoys better global and local drivers: It is believed that the risk of lower oil prices is higher than the risk of a spike in federal funds rates, and that the prospect of significant structural reform in Turkey is more credible than that in Russia.
There will be a Russia trade: After 300 days and 35% underperformance, with valuation discounts at their maximum, Russia will enjoy a re-rating at some stage. Catalysts of this could be: a bounce in oil prices; a reform drive in Russia; a Russian rapprochement with the West over Ukraine; an earlier than expected US Federal Reserve rate hike; or damaging political developments in Turkey.
Top picks: outperformance will come from the non-bank sectors in Turkey, specifically the aviation, retail and steel sectors. In Russia, defensive plays, such as Surgutneftegas, onshoring plays like Moscow Exchange, and cheaper penetration stories, like X5 Retail Group.
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