Russia is narrowing its discount to other BRIC stock markets thanks to strong oil and metals prices but needs to beat corruption to erase the gap, investors and analysts said on Thursday. Debate at a major Moscow investment forum on the relative merits of the BRICs - the large economies of Brazil, Russia, India and China - turned controversial as a sceptical audience challenged the bullish view from the stage.
"If you invest in an asset where there is no guarantee that it won't be taken away, then you need a risk premium. Asset values will therefore be depressed," said Paul Bate, chief investment officer at emerging markets fund manager Matterhorn. Perceptions that Russia is a risky place to invest and too dependent on oil and gas exports have long kept its stock market priced at a discount to the other BRICs, but that gap has narrowed as crude prices have powered through $100 per barrel.
The RTS index is up more than 20 percent since the beginning of December, with Russia seen by investors as a net winner from the inflation pressures that have destabilised import-dependent nations such as Egypt. "Around $93 billion was invested in emerging markets in 2010, but Russia only got a small part of it," said Aivaras Abromavicius of fund manager East Capital, which has $4.8 billion invested in Russia. "But it had a good end to 2010 and we expect that trend to continue as commodity prices remain high," he told Reuters Insider Television on the sidelines of the conference.