Russia and Central & Eastern Europe: Misunderstood markets where risk is oversold

Peter Elam Håkansson and colleagues argued that the size of Russia's discount is unsustainable given the concrete progress that the country has made over the past decade. An inflection point is nearing where the Russian market will undergo a re-rating, which should be a bonanza for investors.

Looking further afield to some of the companies that presented at the East Capital Summit, Eduard Zehetner, CEO of Austrian property investor Immofinanz, called the property market in Russia "drastically undervalued", where yields at shopping centres stand at 12.5% compared with Poland where they are 6.5%.

Surveying the macro picture, Bengt Dennis, a former governor of the Swedish central bank who sits on East Capital's advisory committee, said that most CEE markets have still not returned to full capacity; in many cases the markets are nearing growth rates of the past, but some are lagging and will take more time to get back there.

As a contrast, Turkey was discussed as one of the least export-dependent economies in the region but is benefiting from strong domestic demand from its young and growing population, which is driving the economy and the stock market is reaching all-time highs this year.

For our investors, the important point is not to wait for that broad-based recovery to arrive and an economy running at full capacity before investing, because he or she will run the risk of missing out on the superior returns. We strive to remain at the forefront of developments to recognise interesting opportunities for dedicated investors. We remain committed to Russia, which we think is still misunderstood, and are currently actively investing in the Balkan region. You can review soundbites of the views expressed at the Summit at twitter.com/eastcapital here.

Short film clip from the summit