Investment Barometer

November 2012
VTB Capital Investment Management
Research Department
www.vtbcapital-im.com
2
Contents
Investment Outlook
Market at a glance
Methodology
Contacts
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Investment Outlook

Investment Barometer readings
improved due to investment
opportunities becoming more
attractive and equity volatility
subsiding.
The opportunities indicator
reached the highest level
following quantitative easing
efforts lead by the G3 Central
banks (FED, ECB, BOJ),
European Stability Mechanism
endorsement and the wrap up of
the US presidential elections.
Russian equity volatility remains
below the normalized level. We
estimate that Russian equity
market upside over the
following 12 months exceeds
50%.
The key threats remain to be
posed by uncertainty over the
looming US fiscal cliff and poor
seasonality of Russian equities
in November.


In our opinion, conditions
for positive equity returns
should prevail over bearish
sentiment over the
following 12 months.
Source: VTB Capital Investment Management estimates
Investment Barometer
Barometer legend:
Stormy - The market is under serious stress,
Rainy - The market is under pressure,
Mild - Positive factors prevail, but they are overshadowed
by a number of risks
Sunny Conditions for equity investments are most
favorable
For more details see the methodology section below.
Stormy
Rainy
Mild
Sunny
The fiscal cliff implies fiscal tightening in the USA beginning in 2013, which could push the US economy into a recession.
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Market at a glance (1)
Sources: Bloomberg, RTSI, MSCI, VTB Capital Investment Management
-100
-50
0
50
100
150
YTD RTS Performance
2008 2009 2010 2011 2012
0
20
40
60
80
jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
RTS Sesonality, Monthly data
(100 good, 0 bad)
Score
0
500
1000
1500
2000
2500
3000
3500
2005 2006 2007 2008 2009 2010 2011 2012
RTS vs Fair value
RTS Market prices RTS Fair value (based on DCF model)
0
10
20
30
40
50
60
70
80
2005 2006 2007 2008 2009 2010 2011 2012
Annualized Volatility (30 days), RTS Index
Annualized Volatility (30 days)
Normalized Volatility
-70,0%
-60,0%
-50,0%
-40,0%
-30,0%
-20,0%
-10,0%
0,0%
10,0%
2005 2006 2007 2008 2009 2010 2011 2012
P/E 12m FWD Premium (+) / Discount (-) :
MSCI Russia vs MSCI EM,
Premium (+) / Discount (-) MSCI Russia vs MSCI EM
Average Discount (200511)
0,0
0,2
0,4
0,6
0,8
1,0
2005 2006 2007 2008 2009 2010 2011 2012
Ri sk Aversian on the Financial Markets, (1
Bad, 0 Good)
Bad for equity
Good for equity
5
Sources: Bloomberg, RTSI, MSCI, VTB Capital Investment Management estimates
0
40
80
120
160
200
2005 2006 2007 2008 2009 2010 2011 2012
Index EPS Performance (USD) - Russia vs EM
MSCI Russia EPS, forward 12 months
MSCI EM EPS, 12 month forward
0
500
1000
1500
2000
2500
3000
2005 2006 2007 2008 2009 2010 2011 2012
RTS Performance
0
50
100
150
200
250
300
2009 2010 2011 2012
Investment Style Performance
(31.12.2008=100)
MSCI Russia, Growth stocks
MSCI Russia, Value stocks
0
40
80
120
160
200
2005 2006 2007 2008 2009 2010 2011 2012
Index EPS Performance (USD) - EM vs DM
MSCI DM EPS, 12 month forward
MSCI EM EPS, 12 month forward
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012
MSCI Russia P/E, 12 m FWD
0
100
200
300
400
500
600
700
2009 2010 2011 2012
Sector Performance (31.12.2008=100)
RTS Consumer RTS Machinery
RTS Metals & Mining RTS Energy
RTS Utilities RTS Index
RTS Financials
Market at a glance (2)
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The Investment Barometer evaluates the state of the Russian stock market by assessing a combination of factors: opportunities,
threats, potential market upside/downside and risks. Each factor receives a score within the range of 0-100. The final barometer
reading is defined as the harmonic mean of these factors.
The final numeric score is then converted into a qualitative assessment of current investment opportunities:
(1) Stormy (value between 0-25 points) - the market is under serious stress and the risks outweigh the opportunities;
(2) Rainy (value between 26-50 points) - The stock market is under pressure, which can develop into a storm or a calm state;
(3) Mild (value between 51-75 points) - The market outlook is moderate to neutral, a balance of opportunities and threats
remains;
(4) Sunny (score 76-100 points) - Conditions for equity investments are most favorable, opportunities prevail over threats.
The assessment of opportunities and threats is based on the following factors:
(1) Russian stock market premium / discount to emerging markets according to 12month forward P / E ratios for respective
MSCI indices;
(2) Monthly RTS Index seasonality;
(3) Risk aversion in global financial markets as measured by Citi Macro Risk index;
(4) Assessment of key positive and negative domestic and / or external factors that could impact the Russian equity market .
Estimates of equity upside/downside are based on bottom-up analysis (DCF models) of RTS index constituents for a 12 month
horizon. We use VTBC IM estimates for the base scenario. Optimistic and pessimistic scenarios are derived from the most
optimistic and pessimistic Bloomberg consensus estimates.
The risk assessment is driven by realized 30-day volatility (standard deviation) of the RTS index returns.
Methodology

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VTB Capital Investment Management

10 Presnenskaya emb., block C
Moscow, Russia 123317
Tel: +7(495) 7255540
Fax: +7(495) 7255538
http://www.vtbcapital-im.com/

Contacts
Research Team

Head of Research
Ivan Ilushin, CFA
Ivan.Ilushin@vtbcapital.com

Deputy Head of Research
Alexey Vorobiev, PhD
Alexey.Vorobiev@vtbcapital.com

Senior Analyst
Lyudmila Drobina
Lyudmila.Drobina@vtbcapital.com

Senior Analyst
Andrey Rusetskiy
Andrey.Rusetskiy@vtbcapital.com

Senior Analyst
Evgeniy Grigoriev
Evgeniy.Grigoriev@vtbcapital.com