United for Peace of Pierce County, WA - We nonviolently oppose the reliance on unilateral military actions rather than cooperative diplomacy.

Global investors are eyeing Russia as the next big growth market, the Financial Times said Friday in its "Your Money" section, and suggests that "you" should, too.[1] -- (Shouldn't this rubric be "Their Money"?) -- True, Russia has an "image problem," an "unpredictable political environment," and an "opaque corporate structure," as Alice Ross pointed out, but from the point of view of corporate profits, those can have an upside, too: "The appointment of Dmitry Medvedev as president is seen as a sign that political stability will continue, particularly with Putin continuing to play a key role." -- And "credit is still in its infancy in Russia. Credit cards are virtually unheard of, mortgages are only just beginning to surface, and banks rely on good old-fashioned deposits, rather than sub-prime backed securities for their funding. -- Gary Potter, co-head of Thames River multimanager, says: 'Particularly in today’s environment, Russia offers a potential beacon of opportunity. Having so much oil and gas is an incredibly stable anchor.'" -- COMMENT: If one pulls back from the corporate balance sheets for a moment, one can see another side of the thinking this article reflects. -- As UFPPC said in a statement last year entitled "Are the Ecological Crisis and the Social Crisis Two Sides of a Single Coin?", "there is an essential link between the ecological and environmental crisis that is leading to catastrophic climate change, and the socioeconomic crisis that is producing an ever-growing gap between rich and poor and breeding war and terrorism." -- That link is the culture of late capitalism: "[O]ne cannot understand the concomitance of the ecological and social crises if one does not analyze them as two facets of the same disaster, one that results from a system directed by a dominant stratum that today has no motive but greed, no ideal but conservatism, no dream but technology. This predatory oligarchy is the principal agent of the global crisis." ...

Fund managers and analysts are beginning to sound a note of unanimity that Russia will become the growth story of 2008. The reason: a combination of continuing strength in oil and gas reserves -- Russia is the world’s biggest oil producer -- and a rising middle class causing strong growth in the consumer sector.

Russia is, in fairness, one of the so-called Bric countries -- Brazil, Russia, India, and China -- which were identified in 2001 as the emerging market economies from which great things were expected.

But the others lived up to the hype so much last year that Russia barely got a look in. The MSCI Brazil Index gained 75 per cent in 2007, India gained 71 per cent, and China put on 63 per cent. Russia, in contrast, grew a comparatively puny 23 per cent.

So investors have taken some time to discover the largest country in the world. Tim Collier, investment adviser at HSBC Private Bank, describes this as an “interesting quandary.” The reason, he says, could be Russia’s poor image problem, with an unpredictable political environment and opaque corporate structure putting off foreign investment in the past.

This year, however, things are changing. In the year to date, China has lost 13 per cent and India an alarming 25 per cent. Russia has managed to gain 2.3 per cent, which in the current market is quite impressive, and Collier predicts that GDP growth in Russia will slow only 1 per cent this year to 7 per cent.

The growth of the Russian index is also a sign that it may not be as affected as other countries by the economic slowdown.

This is indeed the case, says Robin Geffen, manager of the Neptune Russia and Greater Russia fund. He says credit is still in its infancy in Russia. Credit cards are virtually unheard of, mortgages are only just beginning to surface, and banks rely on good old-fashioned deposits, rather than sub-prime backed securities for their funding.

Gary Potter, co-head of Thames River multimanager, says: “Particularly in today’s environment, Russia offers a potential beacon of opportunity.

“Having so much oil and gas is an incredibly stable anchor given prices now, around which the government is enhancing standards of living for Russian people.”

The outlook for oil was given a further boost in Vladimir Putin’s speech when he was sworn in as prime minister in early May, when he said that the oil industry was overtaxed.

Collier says the statement from Putin is a “clear positive” for the market. “If these changes were to materialize, the Russian market would benefit more directly from high global oil prices,” he says.

Geffen points out that Russia has a wealth of other commodities too, contributing 20 per cent of the world’s potash, which is used in fertiliser production, a bonus given the agricultural boom. It also has the biggest nickel and palladium producer in the world, Norilsk Nickel.

Putin also said that reducing inflation, which hit over 14 per cent in April and is one of the biggest factors concerning investors, should be Russia’s main aim.

The appointment of Dmitry Medvedev as president is seen as a sign that political stability will continue, particularly with Putin continuing to play a key role.

A note from Neptune even suggests the Russian political scene is more stable than that of the U.S. at present, making reference to uncertainty around the U.S. presidential elections.

So how to gain exposure to Russia? Of the funds domiciled in the U.K., there is currently only one open-ended and one closed-ended vehicle investing purely in Russia: Neptune Russia and Greater Russia and JPMorgan Russian Securities respectively.

Elsewhere, HSBC launched the GIF Russia Equity Fund in December last year, a Luxembourg-domiciled Sicav. There is also the Baring Russia Fund, another Luxembourg-registered open-ended fund. Exchange traded funds (ETF) include the Lyxor Russian ETF, a French Sicav, or the Market Vectors Russia ETF.

Another way to gain access is through a regional fund or multi-manager fund. Marcel Porcheron, research analyst at Bestinvest, recommends Elena Shaftan’s Jupiter Emerging European Opportunities for investors who want to be able to diversify from Russia by gaining exposure to eastern and central Europe too. The fund currently has about 65 per cent in Russia including media and property companies.

A Russian stock, Gazprom, is also the biggest holding in the SWIP Emerging Markets fund at 7.6 per cent of the portfolio. Meanwhile Potter upped the share of his Thames River Global Boutiques Fund in Russia from 1 per cent to 5 per cent at the beginning of the year, taking a stake in Geffen’s Neptune fund.

Now is a good time for investors to get in, says Geffen, as Russian stocks are cheap. “It’s not widely known or widely loved but we’re going to see a good flow of news and these companies are going to continue reporting good earnings.”