Apart from enjoying the tailwinds that GEMs in general are experiencing, Russia is benefiting from a number of idiosyncratic factors and is particularly appealing.
In short, we think that even though the US Congress approved fresh sanctions against Russia, new geopolitical risks are unlikely to crystallise. The relatively muted market response to the passage of the sanctions legislation suggests that most of the potential bad news is reflected in today’s cheap valuations. Besides, a broad-based economic recovery is evident in Russia, fuelled by increasing real wages and a rebound in retail sales. Importantly, orthodox monetary and fiscal policies continue to enjoy political support, which should help the rouble recover a little from recent weakness. Oil, a major determinant of the performance of Russian assets, may not be massively supportive given that current levels are close to the top end of what we regard as a reasonable range ($45-50/bbl). At the same time, continued dollar weakness would probably put a floor under crude prices.
We therefore add a long position in RTSI$ futures as this gives exposure to both Russian equities and the RUB.
On 30 August 2017 we raised the stop loss to 1015 to protect profits.
On 13 September 2017 we raised the stop loss to 1070, locking in profit of 6% since inception.
On 11 October 2017 we raised the stop loss to 1100, locking in profit of 8% since inception.
Profit taking level of 1200 was hit on 4 January 2018 . We closed the trade for a profit of 18.2%.