Emerging markets such as BRIC countries, Countries in Africa provide an excellent ground to test
standard models of the developed markets or explore the specifics of their financial
environment. Such models help us in gauging the return one can expect for the attached risk premium. We would like to highlight and discuss the performance of one such emerging market Russia today.
Over the last one year Russian Stock Market is down 22.22% from the levels of 1800 (12-Jan-2011) to the levels of 1400 (10-Jan-2012) as on date. Its down 43.5% from its all time high of 2478 made on 12-May-2008. The markets are still 1000 points away from its all time high. A comparison with Crude Oil charts does reflect a close correlation with Stock Market performance for Russia. As Crude rises its indices go up. With Crude looking to stabilize at around 100$ barrels with most analysts pointing towards the end of the boom in commodities, Russia will have to come up with new economic sectors which attracts investors and enable companies to raise capital through the markets.
Like other emerging markets Russia exhibits High Concentration and Low Liquidity which creates a vacuum when a investor with big position is switching from one stock to another. This is a nature of emerging markets and gets addressed as new companies get listed on the market leading to increase in market cap and offering new opportunities for the investors to gain from the increasing depth.
