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Russia: a crisis of investor confidence

Recent events around the Crimea have compounded the lingering investor confidence and exposed the economic weakness of the Russian growth model. Business and consumer sentiment in Russia remain weak. In 2013, feeble domestic demand dragged the Russian economy close to stagnation.

When major infrastructure projects came to an end in early 2013, the spare capacity was immediately felt in the economy. Then the expectation that private investors would start investing more during the second half of 2013 did not materialise. The lack of growth to support structural reforms and decreasing profit margins weighed heavily on business sentiment and pushed down industrial activity and investment.

Currently very high risks for investors in Russia remain. Whether equity prices have hit the bottom, or investors would demand even higher potential return before re-entering the market, remains to be seen. Nevertheless, if the situation unfolds faster than currently expected, longer-term investor rewards could be high.

So with Russia remaining “a riddle wrapped in a mystery inside an enigma”, as Winston Churchill famously put it, read senior research analyst Victoria Chernykh’s in-depth analysis of the country’s current economic and investment climate.

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The value of investments can go down as well as up and you may get back less than you originally invested. Past performance is not a reliable indication of future returns. Underlying investments in emerging markets are generally less well regulated than the UK.
There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements.
The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could both increase or decrease. These investments therefore carry more risk. All information, opinions and estimates in this document are those of Bestinvest and constitute our best judgement as of the date indicated and may be superseded by subsequent market events or other reasons. The information supplied is for information only and does not constitute a personal recommendation or advice to invest.