Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Thanks PippaP for the share about the Reddit big buyer. Good to know there are others out there who have taken a long hard look at Poly and concluded that the potential rewards are truly phenomenal. As to the risk, it’s not a comfortable hold for a very happy overweight position! In my estimation, there has to be a material chance that our bet will not work out. Feels like 50/50 sometimes. So many factors that could screw Poly. I can see why professional investors don’t want to roll the dice like this bet. But for me, it’s irresistible. In it to win it.
Don’t think there’s any immediate workaround
But don’t lose sight that odds-on, this all blows over relatively soon and markets resume normal trading. I’d rather JRS just wait it out
To your point, manfor. If a Russian were to buy JRS, they’d be taking the same gamble that we are i.e. that one day MOEX will permit foreign sales and repatriation of proceeds, and that those sales will take place at prices similar to the current prices on MOEX. Neither is a certainty.
We are not home and dry yet in terms of avoiding WW3 and a complete and long isolation of Russia from global markets. If Russia wanted to never ever allow a sale by a foreigner and capital flows out of its country, could it do this? Maybe it could. Could or would JRS do much about this if it happened, I doubt it.
To my mind, the ‘fair value’ being reported reflects the fact that Russian market makers are currently not quoting any offer at all to foreigners (as they’re not allowed to), which is computed as an offer of zero.
Where the £889k comes from, that I am curious.
Today’s RNS tells us nothing that wasn’t already publicly available info.
When will this change? Who knows. Will it definitely change one day? To paraphrase JRS: ‘of that there can be no certainty’. Of course, no certainty is not the same as no probability.
* don’t need to worry about!
Fortunately JRS going bust isn’t something we need to worry about, no matter how long the war goes on. It has no debt.
this amount of fear and uncertainty, and the prospect of things getting even worse on the ground in Ukraine before they get better, and yet JRS rumbles along basically sideways. suggests to me that we're bouncing along the bottom. perhaps nothing too extreme for commited holders to stomach in the next few weeks, nor any opportunities to add at completely ridiculous levels. we shall see.
Yes, grant I don’t except this sale to last years either. My hunch would be war to fizzle out in May. Normally functioning Russian share trading soon after.
sure, an apparent greater prospect of peace will doubtless move the price somewhat for some amount of time. but the fundamental (and much more interesting) issue here seems to be the question of will JRS ever be able realise any value from its Russia investments that are presently locked up on account of some combination of MOEX restrictions, sanctions and Russia being denied certain access to banking systems (the precise mix of which I don't understand).
As to this question: it might well take many months or even years, but I am long term optimistic as I simply don't believe that all those non-Russians who have purchased billions worth of GDRs or ADRS or MOEX equity in Russian companies via long-established financial markets can simply be permanently denied any value whatsoever with no legal redress to anyone (despite and assuming the ongoing operation and profitabitliy of those companies in most cases over the long term). It just doesn't seem plausible. As far as I am aware it would be unprecedented. What seems more plausbile is that, whilst this is a very tricky situation, it is one that is ultimately solvable and will be solved.
Also, on reflection, I am beginning to sympathise somewhat with JRS' continued NAV per share valuations that are but a fraction of MOEX rouble quoted values. Whilst there is but the merest possibility that investors may be permanently deprived of value, they are prudent to represent the situation conservatively. And, if the reality for JRS is the same as it is for me, when they check the quoted value of their Russian holdings that value quoted back to them is indeed, for the time being, £0.00.
Dip seems par for course with traders reacting to negative news flow.
Haven’t seen any more TR1s for several days, which could be positive.
Also, a few thoughts of comfort to myself at least:
-downside risk on this bet isn’t really 100% as it would be with an individual company. Absolute worst case scenario seems more like a 50% loss given the non-Russian assets.
- are shares in the lifetime earnings of heavyweight Russian companies with a long history of impressive profitability something that is worthless? I know what I believe and am positioned accordingly.
Cheers dog. Although, irrespective of whether it’s local sanctions stopping the dealing, or MOEX restrictions, my point remains the same.
https://www.reuters.com/article/us-russia-moex-idUSKBN2EZ1XU
Foreign funds own a huge proportion of all shares on MOEX. ~80%. For me, this means that what these funds choose to do when foreign restrictions are lifted determines MOEX direction. What’s happening right now, amongst small proportion of market participants, isn’t a great indicator of future direction of travel on this index…!
Any thoughts?
Going by FT and NYT journalism, I now see the restrictions as part of a parcel of measures to ensure financial stability in Russia, including both the rouble and their previously tanking stock market. This all seems perfectly understandable, but the thought did occur to me of whether it really is well- intentioned central bank and market regulators who are pulling the strings or is it in fact the Kremlin wanting to get its own back on foreigners for all the sanctions we’ve imposed.
If the later, it’s a bit more concerning as it could go on longer. But even then, wouldn’t the Kremlin see that such a prolonged strategy would be an own goal in the long term. What better way to scare away any remaining future foreign interest in Russian equity and current holders than to make this crowd of investors sit on paper losses for indefinite extended periods. By the same token in the shorter term, the longer they lock in foreign investment, surely the bigger a problem they would create when unlocking. The idea of never unlocking restrictions would prompt a whole world of financial litigation that nobody wants.
As for Russia intervening to prop up its equity markets by buying up billions of shares, yes please, bring it on, although leave a few cheap ones for me.
20 years, ‘zero’ value, moex not reopening to foreign trades until ‘all’ sanctions lifted. Wrong, wrong, wrong
Thanks Soleman. Seems like patience will be needed here then. But also seems like ADRs will re rate up to MOEX prices and not vice versa, would you agree?
If JPM’s ultra-conservatism does prove to be unfounded (among other things), and one day we do see a sharp increase in the reported NAV, it will be interesting to see how quickly buying drives the SP up towards the re-stated NAV. Should get most of the way, fairly quickly
https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/gb/en/regulatory/annual-report/ar-jpmorgan-russian-securities-plc-2021.pdf
A couple of thoughts and observations in case they may be of interest:
- the trust's 10 year financial record on page 27 of the above pdf is a great read. The NAV per share has really perfomed (before the invasion), as has the trust's revenue from dividends. Like clockwork a very high proportion of revenue per share is paid out in dividends. Market value of assets held is volatile, with Crimea annexation, covid and now being lows.
- investment managers seem to do a decent job and costs seem acceptable.
- the companies invested in by the trust are big, cash generative and seem to have excellent long term earnings power. Yes, they will all have a very tough time from sanctions and war (probably losses and no dividends for a while), but no way will they all cease to exist. Buyers for energy will be found. Sberbank will continue its near monopoly etc
- who knows where the SP is going in next week or month. Certainly not me.
- for anyone not invested during March, we now seem to have a truly incredible entry point. War-wise, it seems more likely than not that within some months, things will begin to normalise. Putin doesn't seem to want a fight with Nato, nor does he seem likely to want another post-soviet imperialist adventure any time soon.
- when normalising happens, the tide will turn and we'll begin a climb from 145p.
- imagine the gains if one day (let's say 2027) the trust makes a new all time high and divis are back above 35p a share. You got in below 150p. You do the maths. it's worth having and could happen, as it did post crimean invasion and post covid.
- risk of getting caught up in further SP decline, seems outweighed by long term possibilty.
- trying to time entry for lower price has risk of being late for the boat.
-even imagine a Russia minus Putin, that's friendly to outside world and shares export profits for the good of the country and its people. Its companies (like those held by JRS) and economy would have a bonanza. These lows might be that historic opportunity that so rarely comes along.
- if SP does down in next weeks/months, good, simply buy more.
- if things are going great in some years, and we start reading about russian troops amassing on borders, we know what to do with JRS holdings.
Or oilman even. Same question
Jarv- do you think these 2 funds now want zero exposure to Russian equity? Or just balancing for the redemptions?
Hi Jarv
Fair point - selling by Lazard and CoLI is indeed orderly at about 500,000 per day each. If they keep up at this rate, it’s a lot of supply onto the market in next few weeks!
But I am long term long in a big way, and am willing to ignore this selling in the hope and belief that value will scream loudly enough soon