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Russia: The safest emerging market

Posted April 14, 2008

“Although they’ve had an incredible run, we have to remember there’s a reason we still call them emerging markets. With that status comes a significant amount of risk. I don’t care what’s happened over the past five years; I care what’s going to happen over the next two.” — Andrew Mickey

by Andrew Mickey

Baltimore – (TFN): We’ve been hearing it for years: “You’ve got to be in emerging markets.”

Although they’ve had an incredible run, we have to remember there’s a reason we still call them emerging markets. With that status comes a significant amount of risk. I don’t care what’s happened over the past five years; I care what’s going to happen over the next two. What goes up must come down. The greater the upward run, the greater the risk in the future.

Just take a look at this chart. Over the past three months the Dow has declined 5%. The MSCI India ETF (INP:NYSE) is off 15% and the FTSE/China Xinhua Index (FXI:NYSE) has fallen more than 40%. That’s a lot of risk. These emerging markets truly are emerging, and there’s going to be a lot of volatility.

There is, however, one emerging market that performs like a developed one: Russia. While India and China were getting crushed, the Russia Market Vectors ETF (RSX:NYSE) has done just as well as the Dow. After a quick correction of about 15%, the Russian stock market has resumed its climb and is down a mere 5% over the past three months.

When it comes to emerging markets like India and China, I’ve taken a “buyer beware” approach. Thanks in part to Vladimir Putin’s “stabilization” policies, Russia has avoided the volatility of other emerging markets and shown it has a less risk. View a chart of the RSX and find more from Andrew Mickey.

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Posted by Andrew Mickey · Filed Under International Investing 

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