11th Jun 2015 17:34
LONDON (Alliance News) - JPMorgan Russian Securities PLC Thursday said its performance in the first half of its financial year was behind that of the benchmark, hurt by "the combination of significant falls in the oil price and ruble devaluation".
The trust said its net asset value on a total return basis declined by 2.7% in the six months ended April 30, with its return to shareholders on a total return basis a negative 2.2%, resulting in not much change to the 14.1% discount at which shares trade to net asset value. The benchmark MSCI Russian 10/40 Equity Index in sterling terms ended the period up 1.5%.
"Extreme interest rate volatility also played its part in creating a hostile environment for the Russian equity market, although this abated to some extent in 2015, with little significant tightening of the economic sanctions regime and apparent relative stability of the situation in Ukraine following the Minsk II agreement in February," Chairman Lysander Tennant said in a statement.
Despite its troubles, the trust said it seems likely to pay a final dividend similar to that paid in the previous year, if portfolio companies continue to distribute earnings at the current level.
"Despite the disappointing performance of the equity market and difficult economic circumstances in general, the Company's income from its investments increased markedly in the period. This illustrates the trend we have alluded to in previous reports of a growing number of Russian companies committing to significant dividend payouts. There can be no guarantee that the historically high level of dividend receipts will be sustained given the downturn in economic growth in 2015," the chairman said.
Tennant said equity markets in Russia still present a good long term investment opportunity, even if there are worries about the "lack of a lasting resolution to the conflict in Ukraine and the risk of further sanctions remain barriers to an improvement in investor sentiment towards the region".
"With the assistance of JPMorgan Asset Management's compliance and investment functions the Company remains compliant with all aspects of the sanctions regime that the US and EU authorities continue to apply to Russia, including the additional provisions introduced in December relating to the Crimea," the chairman said.
"The price of oil is a major determining factor for the Russian economy, and it is difficult to predict its development, but at current levels GDP growth is likely to be subdued," he added.
"Despite these matters of concern, the resilience of the Russian corporate sector can be illustrated by its ability to adapt to changing economic conditions and to maintain impressive dividend distributions by historical standards. Moreover the economy has shown some signs of stabilising from the start of 2015 and should this trend continue, there is hope that in time investor interest will return to the region," Tennant said.
By Samuel Agini; [email protected]; @samuelagini
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