What to expect investors from the assets of Russia and emerging markets in 2020

Before we talk about the upcoming year, let us look back, in the last year. In Russia it began with high inflationary expectations related to the VAT increase, rising geopolitical risks and volatility in the oil market. All these risks are so bothered by the Central Bank, in September of 2018, the regulator even preemptively raised its key interest rate to sober especially hotheads.

a Good 2019

However, the dangers that he feared the Central Bank, 2019 not materialized. Wasn’t the January surge in inflation, geopolitical risks throughout the year decreased oil prices also did not disappoint. It’s a mutual understanding between the countries – members of OPEC and Russia for oil.

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moreover, due to the tight monetary policy of the Central Bank, inflation was brought under control and finishing the year at a level below Central Bank target of 4%. In addition, Russia has managed not to slip into recession, although such concerns existed, and the economy remained in the area albeit weak growth.

of course, there were shortcomings, in particular the delay of financing of a number of articles of the state budget, which reduced domestic demand. However, the economic bloc of the government need to put a high estimate. Domestic and foreign investors is, of course, appreciated. They ensured the growth of the Russian stock market by more than 30% in dollars – is very high. The stock market has played all of the geopolitical turmoil and external challenges of 2014, including a heavy blow, 2018

the market of the Russian debt, both internal and external, also pleased investors. The number of bonds showed a total return of over 10% in dollars. Overall 2019 ends on a positive note.

other emerging markets – especially Mexico, Brazil, countries The Persian Gulf and South-East Asia – important events. In Brazil elections, which brought to power a leadership that is close to the current policy of Washington, which is reflected in the securities of Brazilian issuers. We observed the turbulence in Turkey’s relations with the major countries of Europe and the United States. Serious turmoil in Saudi Arabia in connection with the murder of the journalist, the preparation of IPO Saudi Aramco, etc. All these events affected the markets and returns, and volatility was very high. Performed well paper of Brazil, was very volatile paper Turkey and Mexico, Peru and Chile. Overall, the GDP of developing countries grew much faster than developed – about 5 and 3%, respectively.

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the coming year? Of course, the most difficult task will be to accelerate economic growth. If in 2019 the economy was a challenge not to slip into recession, the 2020 target will be support. All preconditions for this: first of all, low inflation, and a number of investment projects that can be launched from large, mainly public, investments. In today’s reality is an important driver of economic growth.

From the Central Bank remains a large margin for reducing interest rates. If you allow the economic situation, they can be reduced by 50 basis points (currently the key rate to 6.25%). That will be a positive signal for the economy.

the most Important event on the Russian market may be the revision of the sovereign credit ratings. Now Russia is showing resilience to external shocks, high discipline in the implementation of the budget and liberal monetary policy towards the exchange rate and capital flows. All three factors can not but rejoice analysts of the global rating agencies, and grasscityVAT on review of their relationship to Russia.

If that happens – and the probability of increasing the ratings, I appreciate how high – that will follow up the revision of the fair ratings of Russian companies, which in turn, will give impetus to the development of the Russian stock market.

in General, In 2020, we can expect total returns of bonds at 8-9% in US dollars and growth of the Russian stock market over 20% during the year.

What will happen to the oil market in 2020, the Situation with oil shale extraction in the US can greatly affect his Business Which sectors will be drivers

Individual players and sectors will behave differently. So, multipliers Saudi Aramco after the IPO will become the new benchmark for Gazprom and major oil companies in the eyes of global investors, which is likely to lead to a reassessment of their shares up.

Companies associated with business cycles, will be under pressure because of lower demand for coal and steel in connection with the economic slowdown. It will all depend on the quality of corporate governance.

But the company’s services and technologies will benefit: will play the role of the transition to the new digital economy and the expansion of the customer base.

Additional factor for Russia – movement of the world capital market, where money is constantly flowing into the more attractive market segments. Largest economies will be in the phase of braking and low yields across the spectrum of instruments, and emerging markets in General and Russia in particular in 2020 will be attractive – we expect inflows to the asset.

Emerging markets and the best strategies

from the interesting regions in 2020 refers, perhaps, all of Latin America, especially Mexico and Brazil. We will also closely monitor the Persian Gulf. Here you can expect important events that will earn.

the strategy all depends on the planning horizon and attitude to risk. Long-term investments of 5-10 years in a risky stock portfolio is quite acceptable. Short-term horizon – about a year and the medium term – 3-5 years require a greater weight of bonds in the portfolio.

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