Van Eck notes that of all the major emerging markets nations, the valuation of Russian companies are the least expensive, with a price/earnings ratio of 6.6. Yet, strong commodity prices continue to boost its economy, which is projected to grow 4.3% in 2011.
“We are strong believers in Russia and many other emerging markets and think that large-cap exposure definitely has its place,” said Ed Kuczma, an emerging markets analyst with Van Eck. “However, we also believe the best way to gain pure-play exposure to a country’s domestic economy is through smaller companies that derive their revenue primarily from doing business locally.”
Kuczma added: “Other potential advantages with small caps generally include less political interference, relatively better corporate governance practices and relatively better protection for minority shareholders interests.”
