Russia is the top investment pick for the biggest emerging-market stock funds in 2010, even after the RTS Index’s world-beating 127 percent rally prompted Finance Minister Alexei Kudrin to say shares are too expensive.

Russia is the leading “overweight” holding among the world’s largest developing-nation mutual funds, EPFR Global data show. More than 95 percent of analyst ratings on Russian stocks are “buy” or “hold,” the highest level since Bloomberg began tracking the data in 1997. Goldman Sachs Group Inc. says Russia is the most attractive emerging market for 2010 and Troika Dialog, the nation’s oldest investment bank, predicts equities will climb about 40 percent.
While Kudrin said at a Nov. 25 conference in Moscow that “speculative capital” led to “overheating” in the market, the RTS trades at 9 times estimated profits, a 30 percent discount to the MSCI Emerging Markets Index. Earnings will surge 43 percent next year, almost twice the gains in China, India and Brazil, as a rally in oil lifts Russia’s economy from its worst recession in a decade, forecasts compiled by Bloomberg show.
“People are waking up to the fact that here’s a place you can’t overlook,” Mark Mobius, who oversees more than $30 billion as the chairman of Templeton Asset Management Ltd., said in an interview. “If you compare Russian valuations now with other major countries, it’s not overpriced. There are still opportunities there.”
(Source: Bloomberg)