Download NN IP overweights Russia`s corporate bonds despite its damaged

for press use only
Investment View
NN IP overweights Russia’s corporate
bonds despite its damaged economy
4 July 2016


Russian credit universe benefits from strong technical demand created by combination of
limited supply and few investment alternatives
NN IP’s Emerging Market Corporate Debt strategy is overweight Russia by 5%
NN Investment Partners (NN IP) is overweight in Russian corporate bonds despite the country’s severe
recession and still relative inflated inflation.
NN IP believes Russian corporates have weathered the storm remarkably well and there are excellent
opportunities by focusing on companies with strong credit profiles, good liquidity and modest domestic
exposure.
Overall, the Russian credit universe benefits from strong technical demand. Due to sanctions, there is
still a very limited supply of new bonds and there is a strong demand from local investors who are flush
with cash and short of investment opportunities. This technical demand pervades given the current
economic situation but over the next 12 months it may dwindle, NN IP believes.
Willem Visser, Credit Analyst at NN IP, commented: “Our Emerging Market Corporate Debt strategy is
overweight Russia by about 5%. Within the broader EM universe, the risk-adjusted compensation for
high quality Russian credit, supported by a strong technical driver, remains attractive and warrants a
selective overweight.
“The Russian economy is showing initial signs of recovery after a steep decline in 2015, when it
contracted by 3.7%, driven by the collapse in oil prices and the rouble. The tough situation was
exacerbated by the international sanctions imposed by the EU and US for Russia’s role in the Ukrainian
conflict.
“To counter the contraction, the government conducted a number of effective macro policy responses
to make the economy less dependent on oil prices. The central bank switched to a floating currency
regime, letting the rouble depreciate sharply against the US dollar. This also preserved the strength of
Russian FX reserves. These reserves, coupled with a low external debt-to-GDP ratio for the sovereign,
act as a bulwark against global headwinds.”
In terms of valuation, the Russian credit universe has tightened to pre-crisis levels as the sector recovers
but there are still attractive opportunities for stock pickers, particularly in the oil & gas industry and to a
lesser extent in high quality metals and mining as well as telecom names.
NN Investment Partners | Investment View
Page 2 of 3
Compared to global peers, the Russian oil majors have been less impacted by the sharp oil price decline.
Profitability has been resilient on the back of currency depreciation and a progressive tax regime that is
linked to the oil price.
The major metal & mining companies expect demand for flat and long steel products to contract by 510% but the negative impact on these corporations is partially offset by their ability to redirect steel and
ferrous products to export markets. They also benefit from cost leadership and strong balance sheets
with very low leverage.
Telecom operators also have significant domestic exposure but they benefit from resilient demand, have
improved their balance sheets through asset sales and investment adjustments and have repaid their
foreign debt.
ENDS
NN Investment Partners | Investment View
Page 3 of 3
Disclaimer
The elements contained in this document have been prepared solely for the purpose of information and do not
constitute an offer, in particular a prospectus or any invitation to treat, buy or sell any security or to participate in any
trading strategy. This document is intended for press use only. While particular attention has been paid to the contents
of this document, no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or
completeness thereof. Any information given in this document may be subject to change or update without notice.
Neither NN Investment Partners B.V., NN Investment Partners Holdings N.V. nor any other company or unit belonging to
the NN Group, nor any of its officers, directors or employees can be held directly or indirectly liable or responsible with
respect to the information and/or recommendations of any kind expressed herein. The information contained in this
document cannot be understood as provision of investment services. If you wish to obtain investment services please
contact our office for advice. Use of the information contained in this document is solely at your risk. Investment
sustains risk. Please note that the value of your investment may rise or fall and also that past performance is not
indicative of future results and shall in no event be deemed as such. This document is not intended and may not be used
to solicit sales of investments or subscription of securities in countries where this is prohibited by the relevant
authorities or legislation. Any claims arising out of or in connection with the terms and conditions of this disclaimer are
governed by Dutch law.
Press contacts:
Karl Emerick Hanuska
T
+31 70 379 1182
M
+31 6 21827870
E
[email protected]
Caroline Wroblewski
T
+31 70 378 1281
M
+31 6 30485111
E
[email protected]
About NN Investment Partners
NN Investment Partners is the asset manager of NN Group N.V.,
a publicly traded company listed on Euronext Amsterdam. NN
Investment Partners is head-quartered in The Hague, the
Netherlands. NN Investment Partners in aggregate manages
approximately EUR 190 bln* (USD 217 bln*) in assets for
institutions and individual investors worldwide. NN Investment
Partners employs over 1,100 staff and is active in 16 countries
across Europe, Middle East, Asia and U.S.
On April 7 2015, ING Investment Management was renamed to NN
Investment Partners. NN Investment Partners is part of NN Group
N.V., a publicly traded corporation.
* Figures as per 31 March 2016.
NN Investment Partners | Investment View