Russia, Finland and stocks

Russia has been in news lately a lot due to the situation in Ukraine. Tensions are rising also in the north as Russia has repeatedly violated Finnish airspace over a short period of time. On friday, Finnish Air Force moved F-18 fighters to locations closer to Gulf of Finland where violations have taken place. Testing, teasing or just plain ignorance from Russian pilots. How knows. Some talk about echos of Cold War.

We in Finland share 1300 kilometers (800 miles) of border and a long history with Russia. They are one of our our most important trade partners, and therefore, the current crisis and sactions placed by EU and Russia to each other are bad news for already stagnant Finnish economy. Overall, the relationship between Finland and Russia is good. However, Finland as member of EU clearly has chosen its side in the crisis.

Many Finnish companies listed in Helsinki stock exchange generate considerable revenue from Russian operations:

• Oriola-KD 38%
• Nokian Renkaat (Nokian Tyres) 35%*
• Aspo 32%*
• Tikkurila 31%
• YIT 27%
• Honkarakenne 27%
• Nurminen Logistics 20%
• Raute 20%*
• Fortum 19%
• Stockmann 17%

*) Reporting includes also other countries than Russia from Commonwealth of Independent States (CIS)

Source: Arvopaperi magazine August 2014


The crisis has already impacted valuations of many of these companies. Maybe good opportunity to buy - maybe not. We don't have stake in the above mentioned companies other than in Fortum.

Russian stock market itself seems dirt cheap:

• P/E 5
• dividend yield around 5%. 

 Source: Arvopaperi magazine August 2014 (Factset, Economist)


We don't have much of a exposure to Russia at this point and I intend to keep it that way for time being. It's currently hard to see how things can get "normal" between West and Russia for some time.