Raising Russia’s Risk Premium
Source: http://www.robertamsterdam.com/2008/07/raising_russias_risk_premium.htmPosted on Monday, July 28th, 2008 | In Emerging Markets, Market Commentary, Russia
Andrew Langley at the Wall Street Journal talks with a lot of very pessimistic analysts following the market fiasco in Russia last week:
Although many observers in Moscow expect that situation to ease as Mechel acts on Mr. Putin’s remarks and amid a consensus among analysts that a state-run energy company will buy the Russians out of TNK-BP, the already-flimsy confidence in Russia’s market was shaken.
Indeed, investors are re-evaluating the risk premium they assign to Russia. “Applying the Yukos-era equity risk premium would lower our fair value For Russian stocks by around 25%,” Renaissance Capital said.
“The current market P/E of 8.7 may no longer offer a sufficient discount,” warned UniCredit, referring to the overall price-to-earnings ratio. P/E ratios are used as a valuation metric; by contrast, the Standard & Poor’s 500-stock index in the U.S. has historically traded at a P/E in the mid- to upper-teens.
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 About Robert Amsterdam (http://www.robertamsterdam.com/)
Robert Amsterdam is a lawyer and an advocate for rule of law. His blog was created to express views which may stimulate debate and discussion on topics of international interest. Robert believes that we live in a world of unchallenged impunity, and he views his blog as merely a small attempt to shine a light on issues he views as important in countries with which he is engaged. He make no apologies or pretense of objectivity - he is merely stating his opinions. |
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