Investment bank J.P. Morgan said on Wednesday it had raised exposure to Russian equities to 'overweight' from 'neutral' after raising forecasts for economic growth (GDP) and further rouble appreciation this year. "Russia is the region's highest beta stock market when see more upside in EM. Russia is highly oil-dependent when oil is rising," the bank told clients.
"We find big cap stocks that tick the value box - Sberbank and Gazprom," it said, adding it expected the rouble to rise to 64.6 against the dollar by end-2016 compared to a current spot level of 67.7. It warned however: "We still see the fundamental case for Russia as weak. We see no progress on structural economic reform and low potential GDP growth, nor do we expect a sustainable re-rating of the stock market in the medium term." The bank also said it had cut South Africa to 'underweight' after trimming exposure to offshore earnings to 'neutral' while maintaining its 'underweight' on domestic stocks. Exposure to Central Europe was also reduced to 'underweight'.