Russia Markets Outlook: It’s not only about Crimea

Russia Markets Outlook: It’s not only about Crimea
 “The pattern of the prodigal is: rebellion, ruin, repentance, reconciliation, restoration”
 Edwin Cole
 Best chance for a rally is in the 2nd half. In this note we look at the reasons why equities, debt and the ruble have under-performed peer groups through the 1st quarter. It was certainly not all about Crimea or the continuing Ukraine risk. The weaker ruble caused more damage in January and February. We also list the factors which may contribute to a recovery in the relative performance through the 2nd half of the year. A 2nd quarter rally is most unlikely as political and economic risks will remain high. 
 Top Russian stock picks. The table showing our Russian Top Stock Picks is later in this note. There are no changes this month. Over the medium term the best themes are likely to be the dividend payers and stocks where either the company or core shareholders are buying additional equity. Risks will remain high through the 2nd quarter but for investors willing to ignore the political noise and make the assumption that there will be no military intrusion into Ukraine and no additional sanctions, this is a good entry point for what remains one of the best long term growth stories within emerging markets.