Global commodity demand has pushed Russia into the economic stratosphere, says Barings Asset Management.
And the firm says the nation’s buoyant economy has prompted it to register its Russia fund in the UK.
Barings says the commodity boom has also benefited a rising consumer sector.
Dr Ghadir Abu Leil-Cooper, manager of the Baring Russia fund, says: “Russia’s status as a major producer of commodities has made it an integral part of the global economy.
“As well as oil and gas, Russia is a significant supplier of other industrial commodities such as nickel, copper, palladium and iron ore, all of which are helping to satisfy at least some of the Chinese commodity demand.
“Strong global demand has helped Russia’s economic growth to average around six per cent after inflation over the last few years.
“This commodity boom has led to the rapid development of the domestic economy and created opportunities in the banking, telecoms, utility and real estate sectors.”
Leil-Cooper says Russia’s government is bidding to improve the nation’s infrastructure through public spending.
“In the current environment we believe that Russia, with its appreciating currency, rising foreign exchange reserves and strong balance sheet, represents an attractive investment opportunity,” he says.
“The effects of market liberalisation in the 1990s are now starting to be felt as the economy stabilises and Russian corporates pursue improvement in business practice.
“International accounting standards and shareholder friendly reporting are but a few examples of such improvements.”
He also says oil wealth has transformed the Russian capital Moscow, which now boasts the highest concentration of billionaires in US dollar terms of any capital city in the world.
He says: “Although oil prices have experienced some volatility over the last few months, they still remain at high levels and Barings expects healthy economic growth within Russia driven by domestic demand.
“It is of course worth noting that this phenomenal growth in Russia has not been without risk. Investors should not lose sight of the fact that Russia has only recently become a more open-market economy and, in the transition, the market has been affected by regulatory changes and confiscatory government intervention.
"Some companies have benefited from the transition and others have most definitely not.”
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