If the ruble can remain close to 60, the crisis will be over for the time being and the result will be far better than most past currency crises. However, no one should assume everything is resolved. Interest rates at 17% and imports 50% more expensive than a year ago (see chart) impose huge stresses on the economy. Add to that the sanctions and the reluctance of European and American businesses to invest in Russian projects, and another currency crisis cannot be ruled out.
Tim Edwards, in an earlier post on this blog, noted that the trailing PE ratio on the S&P Russian BMI is four times, a deliciously low number. It is either too early or too late: If the ruble holds near 60 or strengthens somewhat it may be too late to speculate in Russia; if the next move takes the Ruble close to 100, it is too early. Unfortunately there is no way to know.
This article was written by David Blitzer, chairman of the index committee, S&P Dow Jones Indices.
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