International investor Kim Iskyan, back from a visit to Ukraine, says the West should not expect Russian President Vladimir Putin to stop bullying its next-door neighbor anytime soon, even if Russia's annexation of Crimea and other hostile moves draw economic sanctions and scares off investors.
"Sanctions, as they have been so far, don't really have that much of an impact," Iskyan, editor of the S&A Global Contrarian investment report, told J.D. Hayworth and Francesca Page on "America's Forum" on Tuesday.
Russia and Putin, said Iskyan, are "willing to endure a lot of pain" — more willing, he suggested, than the United States and Europe are to inflict it in any way that upsets their business communities.
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Russian aggression and refusal to back down, however, are not good signals for investors scouting growth markets.
"A lot of people — myself included for a long time — made a living trying to convince investors that over time this discount [in Russia's stock market relative to other countries' markets] would contract as Russia was actually joining the ranks of the rest of the world.
"I think what's happened in the past few months — with what's happened in Crimea and Ukraine — is Russia has actually shown that it's not like the rest of the world. It really is, in many ways, an aggressor and actually is a place that can't really be trusted with your money.
"You could say, well, what the government does is different from what companies do, and I would say yes, but still those companies are located in Russia. You can have very strong companies and very good corporate governance, but still . . . it's a pretty difficult thing," Iskyan said.
Nor does Ukraine's much smaller economy offer much promise to investors, especially not after insurers
decided last month to stop underwriting the embattled country's political and trade credit risks.
"The IMF says that the Ukrainian economy is going to collapse or contract by 5 percent this year," Iskyan said. "I think that's probably going to turn out to be an optimistic figure."
Harm from sanctions, coupled with Russia's recent decision to raise its interest rates on lending, could eventually filter down to average Russian wage earners and consumers. But even those hardships may not dent Putin's standing at home.
"That's something that I think a lot of people in the West tend to forget," Iskyan said, "that even at his least popular, Vladimir Putin had a popularity rating that pretty much any Western leader would die for: around 60 to 65 percent. Now they've got him to 80 percent, 80 percent-plus."
Iskyan cautioned against writing off Russia altogether. Although stuck seemingly forever in the category of "emerging market" and slow to diversify an economy anchored in natural resources, Russia is "enormously wealthy," he said.
But he added, "If you're looking for growth as an investor, it's probably not the best place."
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