What also surprises some people, he added, is that Russia is a consumption play with the economy over 60% driven by domestic consumption. At the same time, the middle-income class is very large.
Further, he said, Russia is currently one of the cheapest of the emerging markets, with investors able to buy stocks at a 45% discount to other emerging markets.
Cheaper stocks in Russia
Svedberg said stocks continue to trade more cheaply because there is a risk premium put on Russia, given that investors tend to dislike domestic politics.
Corporate governance, corruption and oil dependency are other issues, he said, but added that these things are part of the general risks involved in investing in emerging markets.
Yet at the same time, bond investors are putting a premium on the Russian state, with sovereign bonds trading at a premium to other emerging market bonds.
Svedberg said he would expect to see this discrepancy between equity and bond markets to converge so that Russia will only trade at a small discount to other emerging markets going forward.
Getting access to the Russian market
According to Svedberg, many investors think they can simply buy oil stocks or futures to get sufficient exposure to Russia, rather than investing in the country itself.
While this is possible, this means missing out on the domestic story, which he said is the most exciting part of Russia’s growth potential.
It is also important to avoid company- and sector-specific risks by being too concentrated in certain stocks or sectors in Russia.
Apart from specific stocks or sectors, Svedberg said Russia is vulnerable to changes in oil prices, given that this affects the currency, plus the country is dependent on foreign capital related to oil prices.