Politics won’t spoil the hidden treasure of the russian market

As a country, Russia is worthy not only of headlines on the front page but also on the investment pages. With increased transparency and structural reforms comes real growth and a better business environment.
The arrest of Mikhail Khodorkovsky in autumn last year and the recent dissolution of the cabinet highlight the greatest risk in Russia: its lack of legal and political transparency. This is, however, not unusual in a developing economy.
We therefore class such a case as a typical “event risk” to which even positive markets tend to resort to swift overreaction, normally recovering within a very few days when there are no other negative repercussions. For example, when Mr Khodorkovsky’s “right hand man” and head of Menatep Bank, Platon Lebedev, was arrested in July 2003, the markets initially lost 15 per cent, but within three weeks they added 25 per cent to stand ahead of where they had been prior to the incident.