Celina Jade
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Celina Jade in Markets at a glance,

Russian stocks look cheap, but that’s not the whole picture

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U.S. President Donald Trump and Russia's President Vladimir Putin meet in Hamburg, Germany, earlier this month.

Russia’s stock market sure looks cheap, trading at a CAPE ratio (price relative to its past decade’s worth of average real earnings) of 4.9. By contrast, U.S. stocks trade at a 30 CAPE. If you were investing strictly on the numbers, you’d certainly consider putting long-term money in Russian stocks right now. Of course, a moment’s reflection regarding Russia reveals why you might think twice about investing strictly on the numbers. Former hedge fund manager Bill Browder’s thriller of a memoir, “Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice,” published in 2015, suggests why investors are so down on Russian stocks. It may also offer clues into the Trump-Russia saga. Browder, founder of Hermitage Capital Management, was among the first Western investors in Russia when communism fell. With the backing of influential financier Edmond Safra, he bought Russian stocks trading at ridiculously low prices. As Browder tells it, vouchers that the Russian government gave citizens as claims on businesses shifting from government-run to privately owned traded at prices that valued all of Russian industry at just $20 billion. Browder estimates that Gazprom OGZD, +0.36%  , Russia’s oil and gas giant, alone has 10 times the hydcrocarbon reserves of Exxon Mobil XOM, +0.50%   which itself has a current market capitalization approaching $350 billion.