Time To Invest In Russia?

Feb. 25, 2013 4:41 AM ETRSX, OGZPY, LUKOY, OJSCY, NILSY, SBRCY15 Comments
David Hunkar profile picture
David Hunkar

Many global investors avoid investing in Russian equities. Despite the country holding democratic elections and the legalization of private property rights since the fall of communism in 1991, Russia remains a pariah for most investors for a good reason. Some of the factors that work against Russia include the widely-held beliefs that it violates human rights, jails opponents questioning the state, arbitrarily takes over private enterprises, suppresses the media, arbitrarily prosecutes company executes and throws in prison without due process, etc. The list of factors that one can document seem to be endless. Hence Russia is unable to attract high foreign investment in Russian equity markets like other emerging markets are able to.

Russia will host the 22nd Winter Olympics from February 7th to the 23rd of next year in the city of Sochi. By hosting this high-profile event, Russia hopes to present a positive image to the global investment community. Already investors are warming up to Russian stocks with the benchmark index up 5% YTD.

From a recent article titled Russia's image problem in the U.S. in FT's beyondbrics blog:

Chris Osborne, Head of Sberbank CIB USA, would be the first to admit that Russia has an image problem among American investors.

"Selling Russia can be a challenge," he told beyondbrics. "For people who are not already investors in Russia, the image of the country is very negative."

Indeed, despite being the world's ninth largest economy with a rising middle class that's driving a boom in everything from car sales to malls to e-commerce and holidays in Spain, Russia hasn't been getting much love from investors.

Last year Russian equity and fixed income funds attracted a combined $8.8bn of inflows according to EPFR, which tracks fund flows. While this is a leg up from 2011 - when Russia suffered an outflow of $2bn - the amount is

This article was written by

David Hunkar profile picture
David Hunkar (pseudonym) holds a Masters Degree in Finance and Economics. He is a part-time consultant for a financial consulting firm where he manages portfolios for manages portfolios for self and family. He has been an investor for the past ten years. David focuses on foreign stocks trading in the US markets including the OTC market. He concentrates on high dividend yield and dividend growth stocks. ETFs are his another favorite investment vehicle. In addition to his contributions here at Seeking Alpha, you can also visit him at his blog www.topforeignstocks.com

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