UK/RUSSIA - Pension funds are being urged to consider investing in Russia, which is currently one of the best performing European emerging markets.
According to Baring Asset Management head of Eastern Europe, Middle East and Africa Klaus Bockstaller Russia enjoyed GDP growth of 5.4% in the first six months of this year.
Russia had also made moves to improve corporate governance standards. Bockstaller cited the example of President Putin’s intervention to remove the bureaucratic management style of gas company Gasprom.
Schroder’s emerging markets fund manager Gabor Sitanyi said that the events in the US on 11 has benefitted Russia because its economy relies heavily on oil and gas. He said: “11 September raised its international profile and this will help in WTO negotiations.
Also, the US and Europe are keen to diversify from getting oil from the Middle East. So Russia is seen as a more stable supplier of oil to the West. It is a win-win situation for Russia.”
Russian companies have also shown strong profitability with oil company Yukos and the country’s mobile phone operators in particular returning healthy profits.
Barings also cited the low tax rates and trade balance surplus of around $4bn per month which had enhanced the economic standing of the country.
But Bockstaller warned of the risk still involved. He said: “Despite Russia’s recent impressive performance, as with any emerging market there are still a number of risks involved.
With Russia, there is still a threat of the strengthening of the rouble in real terms and an increase in inflation that we expect to be near 20% by near end. The economy is underpinned by oil so any further significant fall in its price could be damaging.”
By Paul Sanderson
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