banking, Heise or ‘Te Investor magazine and now feelances fon.amongothers. The Fanclal ines, ‘ad the International Herald Pabune. BUILDING BRICS: _ THE SECOND IN A FOUR-PART SERIES, RICHARD WILLSHER EXAMINES THE ATTRACTIONS OF THE EMERGING BRIC MARKETS — BRAZIL, RUSSIA, INDIA AND CHINA. THIS ISSUE, THE FOCUS TURNS TO RUSSIA. hie the natural esunces ofthe work's Tangesteounnry may playa ole sn Russi status os amember ofthe | ‘clus BIC ater do tbe fooled vo tinkingofitasaone-tck investment pony eoriomissexpecations or govninin Rus domestic product(GDP) are otavee arin 200, sgt ‘movethan 9 or2011.In the close BHUC company itkaeps $B) bins tndiaand prt ae preaicedo omsrip his bat Russias potenal GD? gow betoen now and250is ‘esate Gos" more than ice tharoftheUSAand ‘nebveetimesth 1815 growth predicedfr the UK bgt eke ptt Opec ete eeebr of Rais ae | coca eee gee a ae ee ge re) pes ee ee (eee 4 Pre Sees ame tent ee eee Fev U sere ev eee eg ge teats reser ie, i i SPRING Laud 48Russian’ shoppingspend. Sales of cars ae ikely to increase, which sone reason that mostof the worlds major manufacturers have invested in Russia Sales ofboorthetako-up of financial product sich as morgages and creditcardsand thenumber of people with access tothe internet ae all caren ow, Inaddtion, infrastructure spendingon roads railways, ports and uss areal ky to increase, The otlookfor these sectorsilstrates the emerging market growth sory that may ‘gather pace over the next decadeas the Russian ‘economy pulls outof whats been shard-hising recession. Certainly, Rusiais well onthe way to zeeuver following the gobal economic erisis 92008 and early 2009. Indeed, the domestic economy has stabived, meaning ssa not dependent on exports alone. The recovery inthe consumer market hes been slo, buts expected. ‘opickcup later this year Ofcourse, Rusia contains vast ol and gs reservesto rival anyother countryon the pianet, and huge amounisoftimbet whileitisone ofthe words bigest producers of electrity and largest ‘growers of wheat Addo thisthe fac hat tisa ‘major gold producer and its Ural Mountains are said tobe packed with other minerals and you hhaveacearpiemre ofthe largely unesploited wealth that could presentsuch tractive ‘opportunities invesiors, “The economy as. awhole svulnerableto ‘Auctutions in the prices ofolland gas because Growth story ve ofthe most industlized former Soviet Republis, Russias teecammunications industry no toingin sz and maturity whiets exportbusinessis dominated by rac resourcessuchas pS ther ierals ‘draw material Voyspeofdseovery eee ee eet ‘these are the leading sources ofits national revenues, Howeve Rusia continues to enter {nto longterm contracts for sales of energy with ~uropean counties and with China, amongother fas growing economies. Furthermore bidet projections suggest that at usc under §20a barrel foroil(atthe emo ofwrting the economy is well sotto make substantial current account surpluses ‘Byenatalfthatleve the country would illbein raft and no ones suggesting hat ol wilhalvein price any ime soon “Tis, together with thigh level foreign ‘cuencyreservesand low sovereign debt, support -Rusis current investment grade edit rating. The Russian government’ cautious economic management, for examplein establishing national sovereign wealth fund —the’Stabilztion Func!’ -launched in 2004, seers ely o ‘encourage the international ratngagencies to review the county ratingvourably in the future. ‘Summing up the atractons of investingin ‘theshare of Russian companies Ed Consoy, (Co-Manager of HSBC Global investment Funds’ Russian Equity potlio, answers with ‘heword "valuatlons! "You havea number ofcompanies whose sock relative to their pers n other markets ‘ried prety cheaply. Ifyou compare the average ‘valuation ofa Russian company againstthe average company'n other emerging markets, usa could he considered around 45% cheaper ‘compared to ahistorical discount of 20% There are potentially good guinsto bemadoas Russia doses the gap tits peers he continues. “Youcan buy fantasti world-lasscompaniesin thecil and materials sectors and there are good. prospectsin inancalsandin consumer ‘goods These are veryintreting investment pportunitosinthomsclves “inaddtion, thereisalott be sid forthearestrabeon | Moscone | RUSSIA BY NUMBERS irra =a eign. ‘benefit fool dverficion hat cou part ‘ofa wellcorstrcte porto have potential 9 ‘Conte decent retin wh he rset aresltofthespreadfnvesimens” How TonvesTIV RUSSIA espossibeto buy individual tos hate quoted theron the Moscow exchange or shad, Gazprom the mor intra an gas oducton and deuudon company, tequoed ‘auth London Sock Exchange for example ower withinvesmentin any marie hese sxe advantagesin being dvesiied and spreading yours. ‘Bldg an stent porto thragh ay, acolecveimesonentscheme sich asa undmeans hatyoucouldbeshelred tom alraf he werstaspects of oly rhe than by baying standalone tas This, youre buying he ‘market oraubole rar anda tars, 17,089,242 Wri argest com by are omar kn) 140m Aare papition =< Bia» $2.1trillion pein te onal _ 16% Percontag of popistion below the powry ne eee Se 39bn eo investnensinany ofthe aeascouldll ell Fussy cmeney eserves USS) fie ee norguatanted and you could gerback lesthan yur orga investment Thiscan ao happen are ofexchangerate vito Cerny these opporunies ave iks sachet them Potical neering, ‘ranparey leurporateinirmadon snd ‘Sictvencsftheloglsystemarealacorsto | Soveeigncredi rating invest grade bearin mind cautionary notes wich cous bidagainst other emergingmases oo, Plingallofne's chips on Rusia or indeed ‘nany her emerging mat, would require a ‘ery stongnerve Invetrsareadsed onser ‘arly especial as investing emerging, ‘rarketeacrien Thee economies havebees | Iestproducer ofl and natal as and may continu to bead adversely by ‘Ronoccondionswsthecounies ehh | c&MuBetst/8A Fan 8 Caen ‘hey ade pee /Somoa os Ibu of de potent forinvestment retus derived om rapidly emering economies is ppesing though then ould bewerhadding Russa to helst of possible insesment destrtons MORE INFORMATION as ena er tol fester FemorenfomatinonhowSBCeeahelpwth | tsar couifataswsos rca. gustosd Notes Gross Domest oduct (USS Surestment needs spesktayourRelaioghip | ardypucntget ack Senger Manage. getownnhsiccouk/remioreal | Tnsemasoteypenesaresutexchongeroe (bis 77070 Fora ldeecyF HSCS vorimone Sek ranitinenmeer sdb son ero twephene services, see ase, ‘rata cent ori a fear