World’s energy chaos turns Russia into top EM pick

World’s energy chaos turns Russia into top EM pick

Bloomberg / Moscow

Surging energy prices are kindling bullish bets on developing-nation exporters, with Russia emerging as traders’ favourite investment destination.

Russia’s rouble has gained more than any other emerging-market currency this month, bolstered by the prospect of higher oil revenues, while the nation’s stocks outperformed as a broad gauge of developing equities sank. Opec’s monthly report will be closely watched this week as investors seek further clues on the outlook for the oil industry.

It marks an abrupt change of pace for emerging-markets investors who’ve spent the last few weeks alternately worrying over the threat of cascading debt delinquencies from China’s Evergrande crisis and the looming prospect of tighter policy from the Federal Reserve. That’s soured demand for the stocks, bonds and currencies of emerging economies across the board – until now.

Investors have switched to weighing the assets of energy exporters from Russia to Colombia – whose peso is the No 2 performer this month – to determine which offer the best bet.

“Energy prices will remain elevated and companies in commodity-exporting nations will be beneficiaries of the global tightness in the supply of power-related commodities,” said Ali Akay, the London-based chief investment officer of hedge fund Carrhae Capital.