Leucadia National Corp

Limited access to international capital and inflating external debts are just some of Russia’s banking woes.

The Bank of Russia has been digging into reserves in an attempt to defend the depreciating currency. These reserves shrunk by about 20% this year.

According to the Federal State Statistics Service, Russia’s industrial production index (IIP) fell to 3.7% in September, compared to a fall of 4.3% in August 2015, YoY.

JANA Partners’ 13F filing disclosed a brand new position in aluminum product manufacturer Constellium N.V. (CSTM) that accounts for 1.83% of JANA’s 1Q 2014 portfolio.

Russia’s woes have only deepened with the Federal State Statistics Service releasing industrial output figures for July.

Several macroeconomic indicators are suggesting that the Russian (RSX) economy is improving.

With Russia’s falling trade surplus, the iShares MSCI Russia Capped ETF and the Direxion Daily Russia Bull 3X ETF have fallen 16.6% and 60.9%, respectively.

Russia’s inflation rate stood at 15.3%, according to a July 6 release by the Federal Statistics Service in Russia.

Industrial production in Russia declined by 5.5% in May on a YoY basis. The Russian economy has seen a slowdown over the past year amid a global drop in oil prices.

In 2Q15, the average falls in sales of US-based energy companies were higher than those of their Russian peers.

JANA Partners’ 13F filing said the fund sold its position in Safeway Inc. (SWY) that accounted for 3.98% of JANA’s 4Q 2013 portfolio.

According to the August 19 release of the Federal Service of State Statistics, the unemployment rate in Russia edged down by 0.1% to 5.3% in July.

The Russian stock market is upbeat, which adds to the ruble’s strength.

The Three White Soldiers candlestick pattern is also a reversal pattern. It forms at the bottom of a downtrend. The pattern has three candles. All three of the candles are long and bullish.

Monetary policy is one of two tools the government uses to control the economy. Fiscal policy is the other tool.

JANA Partners’ 13F filing said the fund sold its position in Huntsman (HUN) that accounted for 3.27% of JANA’s 4Q 2013 portfolio.

Essent Group Ltd. saw an IPO on October 31 2013 that raised $335 million. The company sold 19.7 million shares in the IPO at $17 per share.

Improvement in operating conditions in Russia In July 2017, operating conditions in Russia improved at the fastest pace since January 2017. The Russian PMI (purchasing managers’ index) increased to 52.7 from 50.3 in June 2017. New orders and output saw the strongest expansion, each reaching a six-month high. The surprising improvement in the manufacturing sector comes […]

Russia’s manufacturing activity improved at a slower pace in April due to weaker demand. Growth in output and new orders slowed to eight-month lows.

The IMF expects the economy of Brazil to fall 3.3% in 2016, following its 3.8% decline in 2015.

Icahn Enterprises’ investment strategy involves identifying and purchasing undervalued businesses and assets at distressed prices.

Lukoil’s free cash flow has gone up by 372% in 4Q15 compared to 4Q14 in ruble terms.

Cash reserves for Lukoil (LUKOY), the second-largest oil-producing company based in Russia (RSX)(ERUS), went up by 372% in 4Q15 compared to 4Q14.

The Russian economy remained in recession after having declined by 3.8% in 4Q15 from a year ago. The figure was released by Russia’s Federal Statistics Service.

In this series, we’ll look at how the active and passive funds focused on the BRIC nations have performed. A variety of incidents and developments have led to the loss of investor confidence in these economies.

Russia plans to raise crude prices by boosting confidence among investors and capping the production at January 2016 levels may not succeed.

Core inflation could impact the market positively as well as negatively. Higher core inflation data will depreciate the US dollar (UUP).

Russian officials indicated a possible crude oil production cut meeting with OPEC. However, there hasn’t been an official response from OPEC.

In November 2015, Iran’s oil minister announced a new model of contracts for foreign oil and gas companies during a two-day conference in Tehran. The new framework allows foreign investors to retain the oil fields for a longer period.

Russia’s energy exports have been hurt by falling crude oil prices. Meanwhile, Saudi Arabia has become engaged in a price war with US shale oil producers.

Per the EIA, in 2013, crude oil constituted 68% of Russia’s total exports and 16.4% of its GDP. Also, Europe (FEZ) and Asia account for a significant portion of Russia’s crude oil and natural gas exports.

In its recent outlook, OPEC stated that crude may not reach $95 by 2040. The fiscal break-even cost for different OPEC countries is more than $70 per barrel.

Rising violence in Turkey could directly impact the possible natural gas pipeline from the Middle East. Turkey is an important land transit route.

Gazprom PAO is closely related to the geopolitical tensions in Turkey. Instability in Turkey raises questions about the gas pipeline from the Middle East.

The European Union (FEZ) depends mostly on imports to meet its gas needs. Europe accounts for a significant portion of Russia’s gas exports.

With Russia involved in Syria, Assad’s war against rebel groups and ISIS has intensified. This directly impacts Saudi Arabia’s financing in the war.

OPEC’s outlook was released in December 2015. It included facts about diminishing oil demand by 2040. By 2040, oil might have alternatives.

Saudi Arabia’s direct oil export through the sea is possible in two ways, one is through Bab el-Mandeb, and the other runs parallel to Iranian water boundaries.

According to Markit, Russia’s manufacturing PMI (purchasing managers’ index) declined by 1.4 points and came in at 48.7 in December, as compared to 50.1 in November 2015.

Yemen has been destabilized by Houthis fighters. Iran supports the fighters on religious and political grounds. Yemen is a small oil-producing country.

OPEC stated that crude may not reach $95 by 2040. The fiscal break-even cost of different OPEC countries lies around more than $70 per barrel.

The decline in oil prices is a result of the price war between US shale oil producers and OPEC, where each is pumping oil into the market—leading to oversupply—in an attempt to retain market share.

The price war made life difficult for Russian energy companies and Russia’s economy at large. Asia and Europe are two important markets for Russia.

Venezuela accounted for 17.5% of the world’s total proven crude oil reserve in 2014. According to a study by BP, Venezuela’s break-even cost is ~$23.5.

Russia’s growing differences with NATO could impact Europe’s economy. Russian energy exports meet most of the EU’s energy requirements.

Like Brazil (EWZ), Russia (RUSL) (ERUS) is also struggling with high inflationary pressure. For the September quarter, Russian GDP (gross domestic product) fell 0.57%.

Russia’s presence in Syria is a threat to Saudi Arabia. There’s already cut-throat competition in the crude oil market. This increases the geopolitical tension.

According to data compiled by Rystad Energy, the cost of production per barrel of crude oil is $17.20 in Russia—compared to $9.90 in Saudi Arabia.

Iran’s economy has been crippled due to sanctions. Iran accounts for 9.3% of the world’s total proved crude oil reserve. It’s one of OPEC’s leading producers.

Geographically, Iran is between the Europe and Asia’s gas markets. Iran could be a potential supplier to China (FXI) through Pakistan and India (INDY).

The EU (European Union) mainly depends on imports to meet its need for gas. Europe imports a significant amount of gas from Russia.

Saudi Arabia is an important ally for the US (SPY) in the Middle East. Saudi Arabia is also a strategic point to fight against terrorism in the Middle East.

BP’s (BP) statistical review shows that OPEC (Organization of the Petroleum Exporting Countries) accounts for 71.6% of the world’s total proved crude oil reserves.

Russia accounts for about 1.8% of the world’s GDP, and manufacturing activity accounts for ~15% of Russia’s GDP. Russia’s manufacturing PMI declined slightly to 50.1 in November, compared to 50.2 in October.

Last week, Iran’s oil minister announced a new model of contracts for foreign oil and gas companies during the two-day conference in Tehran.

Geographically, Iran is between the European and Asian gas markets. Iran could be a potential supplier to China through Pakistan and India (INDY).

Europe is a lucrative market for Russian gas manufacturer Gazprom Pao, as it derives more than 50% of its revenue from overseas.

Indonesia is looking for a long-term strategic alliance to support the demand of crude oil for its economy. Since 2003, Indonesia has been a net importer of oil.

The weighted average cost of debt for Russian energy companies stands at 9.6% compared to 1.5% for their US peers.

Because of the supply glut in oil, prices fell steeply, affecting energy stocks and Russia’s GDP growth rate. Oil is currently priced at ~$42 per barrel.

According to the Federal Service of State Statistics, the gross domestic product (or GDP) of Russia has fallen 4.3% for the third quarter.

According to the Central Bank of Russia, the goods and services surplus fell to $8.7 billion in August 2015, compared to $16.2 billion a year ago.

Following the employment report on September 4, the financial and material sectors fell, primarily due to the Fed’s uncertainty surrounding a rate hike.

The energy sector can keep both Russian ETFs down until crude oil prices do not reverse their slide. A fall in energy sector stocks would impact both Russian ETFs.

Although Iran’s return to the oil market won’t lower oil prices immediately, Russia (RSX) will have to take measures against the subsequent fall in oil prices.

The Russian ruble owes its strength to tax payments that exporters will make this year. The exporters are required to convert their earnings in foreign currency into rubles.

The Russian ruble hit a new 2015 high on July 13 of 56.375 against the US dollar and 62.74 against the euro.

Soros sold its 1.20% position in Johnson & Johnson (JNJ) last quarter. Johnson & Johnson’s reported 37% increase in adjusted net earnings in 4Q was mainly driven by its pharmaceutical segment.

Barrick Gold (ABX), the world’s top gold producer, is a 1.25% position in Soros’ U.S. long portfolio initiated in 4Q 2013.

Soros revealed a 1.03% position in Leucadia National Corp. (LUK). Leucadia is a diversified holding company engaged through its consolidated subsidiaries in a variety of businesses.

Soros initiated a 1.01% position in JP Morgan peer Citigroup Inc. (C) in 4Q 2013. Citigroup Inc (C) saw profits more than double in its 4Q results last month, but shares fell as earnings fell short of analyst estimates.

Soros Management initiated a 1.41% position in JPMorgan Chase (JPM) in 4Q 2013. JPMorgan shares were up in November last year after the bank put its legal issues behind it.