The Russian equity market has again grabbed the headlines by offering some of the “cheapest” equities in the emerging markets. But are these bargain prices? Many of these company valuations are driven by inefficient, poorly managed and shareholder-unfriendly state-owned enterprises, which appropriately trade at deep discounts to the broader market.
However, there are exciting growth prospects to be found within the Russian market, such as Internet and other privately managed companies. We believe these companies offer investors attractive opportunities relative to the incompetent state-owned listed giants. Year to date, the market has rewarded these opportunities with superior returns, as can be seen in the chart below.
As growth investors, these are the opportunities we are looking to uncover when investing within emerging markets such as Russia.
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