A lot of things are suddenly going Russia’s way, the most important of them emanating from Washington. The Mueller Report, despite voluminous detail on Moscow’s election interference, broke no news on that score that could combat the prevailing “sanctions fatigue.” The Trump administration’s reinvigorated campaign to block Iranian export is putting one more prop under a surging oil market.
Political clouds, and the country’s own snail’s-pace macro growth, have obscured the dynamism of Russia’s corporate sector, adds Jacob Grapengiesser, a partner at Stockholm-based East Capital. He anticipates 18% average profit growth this year for listed companies, even as gross domestic product limps along at about 1.5%. “You have a lot of market consolidation and stores or services that weren’t there before,” he says.
Russian energy producers excite investors less right now. They were not so badly beaten up last year. Their gains from high oil receipts, which are heavily taxed, may be more than offset by the surging ruble, which increases their costs. But Grapengiesser is still keen on No. 2 oil producer Lukoil , thanks to aggressive share buybacks that have lifted its effective dividend yield to 13%. The current repurchase program ends on May 1, but he is anticipating renewal.
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