Russia Stock Market Valuations and Expected Future Returns

Updated at Tue, 21 Nov 2017 20:30:17 -0600
Country: Russia (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 142%; Minimum - 16%; current - 22%
Expected future annual return: 27.3%

ETF Used for dividend yield: ERUS (Yield=2.89%)
Market Index used: RTS Index (RTSI)
Current Annual GDP: $1,560 billion US dollars or 90,714 in billions of national currency (GDP in Local Current Prices Annual Growth=10.34%)
Data since year 2000


Russia Historical GDP Growth

Historical GDP of Russia in billions of national currency. The GDP in local current prices has grown at the annual rate of 10.34% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $1,560 billion US dollars or 90,714 in billions of national currency.

Russia GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Russia in billions of national currency. This value is normalized using the data published by WorldBank. RTS Index (RTSI) is used for the normalization. The RTS Index (RTSI) is an index of 50 Russian stocks that trade on the Stock Exchange in Moscow.

Russia Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Russia is 22%. The historical high was 142%; the historical low was 16%. If we assume that the ratio will reverse to the historical mean of 60% over the next 8 years, the contribution to expected annual return is 14.1%. This is the detailed historical chart of the ratio.

Russia Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Russia stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 60% over the next eight years.

The blue line indicates the actual, annualized return of the Russia stock market over eight years. We use “RTS Index (RTSI)” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Russia

Conclusion

The stock market of Russia is expected to return 27.3% a year for the coming years. This is from the contribution of economic growth in local current prices: 10.34%, Dividend Yield: 2.89% and valuation reverse to the mean 14.1%.

This is the projected return of the stock market in Russia relative to other countries. Click on each bar in the chart to go to other countries:


You can go here to see what international stocks Gurus are buying.

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