What does the Putin/Trump ‘bromance’ mean for Russian equities?

With Trump’s inauguration now just six weeks away, Stefan Herz, lead portfolio advisor EMEA markets, Charlemagne Capital, assesses what his relationship with Putin may mean for Russian equities.

“It was clear during the last weeks of the US election campaign that Putin preferred a Trump victory over having to work with Hillary Clinton, who, afterall, described him as a “cold-blooded, calculating, former KGB officer, who is determined to enrich himself and his closest colleagues…” and whose foreign policy goals have repeatedly clashed with those of Russia over the past few years.

On the other hand, the ‘bromance’ appears to be flourishing, with Trump not shy in returning Putin’s compliments. The question that we as investors need to grapple with is obviously what all this means for Russian equities.


Without the support of Congress, Trump would find it very hard to abolish any of the existing sanctions, as even executive orders can be overruled by Congress via the passage of new laws. Congress is unlikely to want to be seen as going soft on Russia but we can certainly expect the sanction rhetoric to become weaker, which is also likely to be welcomed by a number of European countries: net-net positive for Russia.

Infrastructure investment

Whilst the Mexican wall is unlikely to ever be built, increased investment in infrastructure should be one of the easier election pledges on which to follow through. The extent is hard to predict but, on balance, this should be supportive for commodities: net-net neutral for Russia.

US interest rates

An increase in US interest rates certainly looks more probable before the year end which, combined with overall nervousness regarding Trump’s economic policies, is likely to keep a lid on US dollar performance: net-net positive for Russia/rouble.

Russia as an emerging market safe-haven

US-Asian relations are now at risk of protectionist trade policies, as indeed are relations with Mexico, whilst tighter immigration policies are unlikely to improve relations with the rest of Latin America. The risk premia at which Russian stocks have traditionally traded versus their global peers should gradually reduce to reflect the new order: net-net positive for Russia.

Will there be a sustained bounce in Russian equities?

We believe that this is more likely than not. Russian equity valuations are attractive in a global context, risk premia for Russia are likely to reduce and the factors above will play into the hands of Russian investors.

Fundamentals will continue to drive our investment process and these do not change overnight. Hence, we are not trading on the back of these election results, preferring instead to see our Russian stock picks do their job to provide long-term performance. Our investors, however, need to make asset allocation decisions and we believe that the seismic shock provided by the election result provides a great opportunity to reassess the case for investing in Russia.”

Elite Rated Charlemagne Magna Emerging Markets Dividend currently has a 6% holding in Russian stocks.

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