Lukoil, Novatek and Rosneft combine for over 18% of RSX’s weight and 21.3% of ERUS. Increased insider buying share repurchases at Russian firms comes against the backdrop of some of least expensive stocks in the emerging world. Russia’s benchmark trades at 4.8 times earnings, barely more than a third the valuations on Indian stocks and just over half the P/E on Brazil’s benchmark Ibovespa. Russia typically trades at a discount to the MSCI Emerging Markets Index, but stocks there have been deeply discounted relative to their historical valuations for close to a year. [It’s Expensive to Bet Against Russia ETFs]
Mattias Westman, the chief executive officer of London-based Prosperity Capital Management told Bloomberg share repurchases low valuations at Russian firms could be “substantial.” Increased buybacks would be coupled with Russia’s rising dividend footprint.
Russian companies, among the emerging world’s most prodigious generators of free cash, are under pressure by Putin to ratchet up dividends to 35% of net income in the coming years. Russia’s rise as a legitimate emerging markets dividend destination gives it an 18.7% weight in the WisdomTree Emerging Markets Equity Income Fund (NYSEArca: DEM), far larger than rival funds. Last year, Russia was the fastest-growing dividend payer in the WisdomTree Emerging Markets Equity Income Index, DEM’s underlying index. [Russia’s Dividend Rise]
Market Vectors Russia ETF