Russia's Economy Remains Weak

Robert Hsu, September 22, 2009

Early this year, I gave you my outlook for Russia in 2009 -- and not much has changed for the better since then. Though the Russian stock market has made a nice run of it recently from its lows in late 2008 and early 2009, the economy itself remains feeble and I expect it will for some time.

In fact, even top Russian officials don't expect their economy to fully recover before 2012. In August, Russia's economy shrank by a depressing 10.5%. That's compared to a 2007 peak of 8.1% growth.

As I've mentioned before, Russia was hit hard by the global economic slowdown because of its dependence on commodities and energy -- including crude oil and natural gas. In fact, energy accounts for nearly 70% of Russia's exports, and the economy was badly injured due to the price of oil falling dramatically last year.

Though crude oil has since rebounded slightly, the country continues to struggle. While Russia's government implemented a 3 trillion ruble ($93.5 billion) stimulus package, it wasn't enough to spur growth or boost lending in the country.

And although Russian industrial output gained in June and July, it declined by 3% in August -- suggesting the recovery will be volatile and riskier for investments.

So while my Asia Edge readers made money in the past with Russian investments -- including a 248% gain in Mechel (NYSE: MTL), a Moscow-based mining and steel company -- right now the risk/reward ratio is too high to safely profit from trends there. For now, there are much more profitable opportunities to focus on elsewhere in Asia rather than taking our chances in Russia.

Take a look at just a few of our short-term gains in Asia Edge that we've already locked in for 2009:

China TransInfo, sold for a 87% gain in 8 weeks
51Job, sold for a 57% gain in 8 weeks
Southern Copper, sold for a 52% gain in 4 months

Join us at Asia Edge today for the most profitable trades in emerging economies throughout Asia and the world.

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