http://www.forbes.com/sites/kenrapoza/2015/05/11/as-russias-stock-market-soars-ukraine-stuck-in-frozen-conflict/
I can hear it now: nice going FORBES, valuing money over people’s lives. A disclaimer: this is the investment channel. And that means crisis is looked at through the lens of economic pain and gain, not who is a better president: Poroshenko or Putin, nor the history of Crimea and the Donbass. So with that out of the way, investors be warned. There is new political risk along Russia’s border in Ukraine. If this heats up, the stock market boom that has Russia outperforming the world will be revalued in short order.
The Market Vectors Russia (RSX) exchange traded fund is up 38.35% year-to-date in dollar terms. The Micex in Moscow is up 22.3%. Over the past year, the weaker ruble has provided a lift for investors with ruble equity. The Micex is up 24.57%, well above inflation. The ruble, helmed by central baker Elvira Nabiullina, is up 18.4% against the dollar. The Ukrainian hryvnia is down 22%.
While some in the Ukrainian government will tout progress on Europe’s Marshall Plan experiment there, it is clear that the country is in dire straits. Ukrainian Prime Minister Arseniy Yatsenyuk promised he would be the most unpopular PM in Ukrainian history. He’s well on his way. His approval rating is now below 30%. Economic issues aside, the country is living a tenuous cease-fire with Russian backed rebels in east Ukraine. Arent Thijsen, a fund manager in Amsterdam with $250 million under management at T&E Inmaxxa doubts Ukraine will ever join the European Union, despite the roughly $10 billion they are providing the government. “It’s a mess there, a frozen conflict,” he told me. “People have to recognize that Ukraine economically cannot survive without a good relationship with Russia. I don’t see any future for them without Russia, and yet sentiment against Russia is very strong in Kyiv. I don’t see them getting along with Putin anytime soon.”
All of this creates a problem for Russia investors like Thijsen...MORE
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