The opportunities arising from EM rate cuts

Central banks in emerging markets are cutting rates as expectations of easier monetary policy in the US give emerging countries more flexibility to stimulate their economies. This could bode well for investors in countries such as Russia given that valuations are already very appealing.

Russian equities trade just under 6x price-to-earnings, which partially reflects the political and sanctions risks. However, equity investors are being partially compensated with one of the highest dividend yields across emerging markets—at nearly 7% compared to 3% for the MSCI Emerging Markets index. Meanwhile, Russian economic growth has recovered from the 2015 recession where oil prices have since collapsed, and inflation has reduced significantly, aided by an independent central bank implementing credible monetary policy. Additionally, the Russian government's budget spending has adj...