Trading Russia as Emerging Market - you want to know this if you venture there.

china white

Established member
979 12
It is tempting (and very profitable if you know what you are doing) to trade such EMs as Russia or Brasil in the times of a crisis. In my particular case I have been short local currencies (Brasilian Real and Russian Rouble) against the USD since Srptember last year. You can pretty much figure out if I am in the money or not :cool:

What makes things even jucier is that in this day and age you can easily get quarterly contracts on Rouble/Dollar cross listed on FORTS, the futures and options exchange in Russia. You can trade the front-end contract there (March09 currently) with a leverage of 25, and the following one (June09) at 20 leverage.

HOWEVER you need to know the following if you intend to venture there:

Starting recently, the taxman in Russia decided to clock up some extra ducats and pulled a fast one really. Check this out:

It has always been common practice in Russia that people could not net off spot trades and futures/options for tax purposes, but that's something everyone knew of. Starting a couple of weeks ago, you cannot even net off winning and losing trades in the same underlying, say you made a mil trading March contract in USDRUB and then you lose a mil trading exactly the same contract, the taxman will still come to you for 13% of the winning leg, i.e. for 130K.

Insane innit? :cry: What is even worse is that the taxman in Russia has the authority to go to FORTS (futures/options exchange) and freeze your money there towards your tax liabilities payable by February 2010. How does that sound? Long story short, I have 8.5 mil roubles frozen on FORTS, plus apparently the taxman wants another 2.5 mio roubles, that being something they did not have a chance to put their hand on. All that on my current P/L of 13 mio Roubles since the beginning of the year. Just a tad above 13% Russia's tax on investment innit? :(

Goes without saying, this new trick had not been advertised at all, everything happened cloak and dagger so to speak, you'd just log into your account on FORTS one day and see your money frozen with a small print notifuication that your tax liability for 2009 has been re-calculated .....

Well, joys of making money in Russia :mad: Of course the exchange and quite a few people far more influential than me :cool: are lobbying lifting this new tax practice rightly arguing that if this shaban keeps on going, Russia can forget about fresh money invested for the next decade which is hardly in line with Mr Prersident's statement in regard to developing free markets in Russia etc.... - however the way it stands now, people are pretty much shafted.....

Something I thought you might want to know if you decide to take a position in Russia.
 
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Mr. Charts

Legendary member
7,370 1,194
Good to see you posting again, china white :)
Even if the subject is not good.
Hope things improve for you.
Richard
 

china white

Established member
979 12
hey mate, good to hear from you. Hope all is well

Just wanted to share some of my EM battle stories with everyone. I personally think this one is so massively absurd that people should be aware, esp. those younger lads and lasses who are easily lured into trading EMs without having proper information.....
 

wasp

Legendary member
5,107 879
I concur, another of my 'darksider hero' returns from the mist....
 

china white

Established member
979 12
hey thx for your words! Hope all is tip top on your end as well. I am sure we are in for a very interesting year in 2009, belatedly perhaps, Happy and Prosperous 2009 fo all you lot! :)
 

wasp

Legendary member
5,107 879
Thanks to you and Socco I have never stopped in my quest to become a proficient darksider and never stop learning, and for that I will always be grateful to you both! Anyhow, shall stop disrupting your thread.

Good trading!
 

Mr. Charts

Legendary member
7,370 1,194
I'm fine, thanks, china. Still earning a good living from day trading US shares - it's almost 10 years full time now.
Russia is far too exotic for me.
Mind you another year or two of Brown and his mindless mob destroying the country and we might be looking enviously on the freedoms and economy of Putin's Russia...........
The experience of countries that start doing what you have described suggests an early exit with whatever is possible might be a wise option for the long term. These things only tend to deteriorate.
Richard
 

china white

Established member
979 12
Mate from my experiences trading EMs is not that different from trading Spooz or FTSE, just massively higher Beta that's all, plus much more immediate impact of oil prices in a market like Russia which is a mega net exporter of oil and gas or Brasil which is to become such once they start pumping oil out of Tupi field.

As for my equities exposure last year I was mostly playing short Russian oils vs long Brasil's Petrobras, it did indeed earn me a nice lil earner however obviosly with the barrel shrinking from 140 down to low 40-ies noone is a safe heaven in the oil world..... Did some BG Group and GALP Energia of Portugal, but mostly in conjunction to their participation in Petropbras's new oil discoveries off Rio de Janeiro.

Or am I getting too old to start trading fundamentals????? :) Only joking....
 

china white

Established member
979 12
RTS website for those interested.

By the way, RTS (Russian Trading System) is actually quite cool for an exchange, quite a few contracts listed etc..... If you are interested check out their web site:

Russian Trading System Stock Exchange :: RTS. English

You can even trade EURUSD or Brent there...

But beware of - I wanted to say Russia's taxman, but that's only half of the problem - beware of the unpredictability of Russia's taxman. You'd be probably safer keeping your money with one of Paul Newman's heroes than with RTS (n)
 

china white

Established member
979 12
Working 36,275 avg entry June 8.09

FYI. I am working staggering entry into USD/RUB @ 36.275 June 09. Getting clips done from 36.395 downwards. Looking to enter 5000 contracts total (5 mio $ notional).

With Brasilian Real hitting 2.37, Rouble should be hammered all way down back to the upper range of bi-currency basket @ 41.

Gor information:

Derivatives Market FORTS :: Instruments :: RTS. English

Good luck trading!:D
 
 
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