Russian Equities Are Decidedly Cheap

The Exhibit shows the ratio of RTS (scaled by 1000) to nominal GDP. Clearly, Russia looks cheap. But cheap does not mean that it cannot get still cheaper. That is exactly what I discovered last year when I bought RSX around 19 and it fell like a stone to below 12. That said, after the global rally in equities, valuation still supports a case for upside in this market.

Even if one gets the short-term wrong, there is always the case for buying resource oriented equities for the longer-term.

Sector Performance Since the Correction Started

Oil and materials have driven markets lower. That is in line with reality. It is important to remember that the years 2003-2007 were about a synchronous global upturn and not just India and China growing at a breakneck pace. The global recession will certainly end sometime in the near future. Yet, a worldwide boom is nowhere in sight.