Top investor turns bearish on Russia

Fund manager has grown more pessimistic on Russian assets

Long-time Russia investor Ashmore Group Plc is joining the bears. The emerging-market specialist with $76 billion (Dh279 billion) has grown more pessimistic on Russian assets because of their indefinite exposure to US sanctions. That’s driving the money manager to gradually trim holdings in a capitulation atypical for a firm that braved sell-offs in previous years.

US sanctions on Russia amount to a “slow-moving train wreck” for investors and things will only get worse as the investigation — on Russia meddling in the 2016 US presidential elections — draws to a close, Ashmore’s head of research Jan Dehn said. Additional “undisclosed, indiscriminate sanctions” are possible if Mueller’s probe implicates Russia for interfering in the 2016 US presidential election, hitting the country’s assets even harder, Dehn said.

Such a gloomy outlook from an emerging-market investor well known for taking risks on distressed markets such as Venezuela adds to the pain for Russian policymakers already trying to stem an outflow of investment. Foreigners have pulled about 500 billion roubles ($7.6 billion) from local bonds since sanctions were imposed on Russian companies and individuals in April. Since then, yield on Russian 10-year rouble government bonds has risen to about 8.7 per cent from around 7.2 per cent in March.

US Congress may pass measures early next year, which could block US investors from buying new sovereign debt and aim to shut Russia’s biggest banks out of the global financial system.