Picking Up Russia Stock Market

A goodly number of readers of the blog are from Russia. Since the view on Russia of an old
US pro might be of interest over there, I am adding Russia to my list of foreign stock markets
of interest. Russia is a resource based economy. Their market tracks well with my global basic
industry indicator, the oil price and the US stock market. The Russian market trades at a huge
p/e discount to the global average, but features well above average volatility. So, despite all
the qualms one might have about Russia's financial, legal and political systems, there is value in
the market and the kind of "beta" or volatility that would warm the hearts of most traders.

The Russian market fell around 90% in the financial panic / global recession of Half 2 '08 -
early 2009. This compares to a 77% drop in the oil price and a 32% decline in my global
basic industry indicator over the same period. Since the bottom in early 2009, the Russian
market has recouped much of the loss, but still stands about 32% below the previous high.
The oil price has made a similar recovery, and the global basic industry index has rebounded
strongly on rising production and sharply higher industrial commodities prices.

The oil market is crucial to Russian fiscal policy and broader economic strategy, and with a
global economic recovery underway, elemental risk should be only moderate for the economy 
over the next couple of years.

So, Russia looks to be interesting for traders and investors in 2011 and beyond. The market
is presently overbought in the short run, having rallied nicely along with the oil price and
the SP 500. Time for me to watch it carefully going forward as there could be some nice
tradeable opportunities next year.

See chart for comparison of Russian, US stock markets and the oil price.