(Bloomberg) -- Russia-exposed stocks rallied from Turkey to eastern Europe as Donald Trump’s election victory prompted investors to position for moves toward a resolution of the war in Ukraine despite massive remaining obstacles.
Companies across the world were forced to cut back on business ties and divest from assets after the US and its European allies deployed sanctions in response to Russia’s full-scale invasion of Ukraine in 2022. Western companies that kept significant operations there have also seen their valuations pressured.
Trump’s campaign pledge he can get the war to end quickly faces the challenge of reconciling Russia’s war aims with Ukraine’s fight to keep its territory intact. Yet investors took some solace from Ukrainian President Volodymyr Zelenskiy’s openness to resetting relations with the Republican leader after his victory.
Shares in Vienna-based Raiffeisen Bank International AG jumped as much as 10% Wednesday. Hungary’s OTP Bank Nyrt., which also has Russian operations, touched back-to-back record highs in the past two sessions, ahead of its quarterly earnings release Friday.
Turkish companies with Russian operations, including the construction firm Enka Insaat and beer maker Anadolu Efes also surged.
“There is an attitude among some investors who’d like to take early positioning even on the prospect of a settlement,” said Adnan El-Araby, a fund manager at Barings Emerging EMEA Opportunities. “Any potential settlement is unlikely to come before the first half of 2025, and any easing on sanctions would take even longer than that.”
Emerging markets in Europe, especially banks, would be the biggest beneficiaries from a potential decline in risk premiums in such a process, El-Araby said.
Russian businesses don’t expect any relief yet, according to several people interviewed, including commodities tycoons as well as officials from the government and state-run business.
Trump’s victory is unlikely to lead to a rapid improvement in economic relations with Russia, said Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, the biggest business lobby group, according to Interfax.
Ukraine Bonds
During Trump’s previous term, he imposed several packages of penalties, including on aluminum producer Rusal and natural gas project Nord Stream 2. The foreign ministry in Moscow said Wednesday that it had “no illusions” regarding the matter and the political elite in the US is anti-Russian “regardless of party affiliation.”
Nevertheless, the rally in eastern European stocks could be attributed to the bets on a de-escalation in the conflict, said Gabor Bukta, an analyst at Concorde Securities in Budapest. Another stock that is benefiting from that trade is London-listed Wizz Air Holdings Plc, which is headquartered in Hungary and used to fly to Russia and Ukraine, Bukta said.
European companies with ties to Russia stood out among the stocks that have rallied in the wake of Trump’s win, said Egle Fredriksson, a portfolio manager at East Capital Financial Services AB. Further down the line, the reconstruction of Ukraine would likely “provide substantial economic benefits to neighboring eastern European countries,” she said.
In fixed income, Ukraine’s sovereign dollar bonds were among the top performers in emerging markets for a second consecutive day on Thursday.
(Updates with fund manager quote in penultimate paragraph)
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