Ironically this headline could be applicable to any number of countries the past 10 weeks... of the BRIC countries, the R gives me the most quakes, but you can't argue with the recent performance [May 20, 2009: Year to Date Returns by Country, Go Peru] ... you need to have serious antacid supplies to invest in Russia through thick and thin. While it has had the best performance of the BRIC countries (Brazil, Russia, India, and China if you do not know the term) this year - it had a debilitating fall beforehand. Essentially I find Russia to be a call option on oil, I am sure if you plotted oil and Russia together you'd see a similar arc although the beta (swings) in Russia would potentially be even more vicious than oil has been the past few years.

Market Vectors Russia (RSX) which is probably the broadest way to play the country peaked just under $60 May 2008 - remember back then we were hiding out in commodities as they were the one group decoupled from the general market correction, and then fell to just a fraction over $10 by October. After a >100% gain off the bottom it still trades in the low $20s... in fact it has just now come back to fill the gap in the chart from a death drop in the first few weeks of October. You can toss in a short lived war during that time frame as well.,, and a series of ruble devaluations. Oh yes, the stock market was closed a few times... :) Wednesday of last week RSX crossed back over the 200 day moving average/ for the first time in a long time. But again, as goes oil - so seems to go Mother Russia.

Via New York Times:

  • Despite continuing weakness in the Russian economy, the stock exchange here has surged to become the best performing in the world, after being the worst last fall. (hmm, I guess Peru was passed in the past week?)
  • After the sell-off last year pushed the valuations of Russian companies to record lows, rising energy prices in recent months have drawn investors back into the market, traders said, even as the government has twice downgraded its expectations for growth this year. Other big emerging markets, including China, India and Brazil, have rebounded sharply in recent months on signs that the fractured global economy may be beginning to heal, but none have been more buoyant than Russia.
  • Investors are not analyzing macroeconomics when deciding whether to invest in Russia, the chief economist in Moscow for Merrill Lynch, Yulia Tseplayeva, said. (that's an understatement) They look at oil prices/, and believe that when oil prices rise so will the Russian market, she said. And that is true. ... for all Moscow's effort to diversify the economy, the rise in Russian equity values has closely tracked the price of oil, by far its largest export commodity - much as the market plunge last fall coincided with the collapse of oil prices.
  • Officials now expect a contraction of more than 6 percent in the Russian economy before it begins to improve. The Micex index of major Russian company shares, for example, is up 105 percent after bottoming out on Oct. 27.
  • For some investors, the very air of dismal news hanging over the country inspired contrarian bets in February and March that shares were oversold. It seemed a consensus emerged generally that Eastern Europe was going to hell, Ian Hague, a partner at Firebird Capital Management, a New York hedge fund that focuses on the former Soviet Union, said by telephone. When you see that, it is very bullish. Because the reality is never as bad as people's fears. (whatever happened to Eastern Europe? Did paper printing prosperity suddenly make all those fears people were listing go away? Paper printing is truly a magical solution to all the world's ills) [Feb 27, 2009: John Mauldin on Yahoo's Tech Ticker] [Feb 18, 2009: Banks Reel on Eastern Europe's Bad News]
  • In the second half of last year, oil prices declined 75 percent and the RTS index fell by 72 percent, said an investor note from UralSib, a Moscow brokerage firm. This year, crude prices have risen 59 percent and the RTS index 58 percent. (well that answers my question above - the variance tracking is remarkable... 1:1)
  • Still, Russian stocks plunged last fall not only because of oil price declines, but also because many Russian industrialists had pledged shares as collateral for loans, and were required to sell when credit lines were called in. Then, uncertainty over the stability of the ruble prompted foreign investors to sell shares. By late January, however, the ruble had stabilized and the forced selling was over, eliminating two Russia-specific risks and leaving a very depressed market behind. Then oil prices ticked back up.
  • And the Russian stock market bounce came in spite of looming troubles in the real economy that analysts say make it look tenuous. (don't worry about the real economy - that's just a minor detail; we don't worry about it here - just talk green shoots and bid stocks up as central banks offer money to anyone ... chicks are free too)
  • Since its inception after the collapse of the Soviet Union, the Russian stock market has been either in the top five performing markets in the world or the bottom five in every year except one, according to Renaissance Capital, a Moscow brokerage. (another remarkable fact - someone kick me to remind me the next time Moscow devalues its currency and closes down the stock market next time around to GET LONG RUSSIA)