Be Careful When Investing In Russia
I don't think I've been able to pick up a financial paper or magazine over the last 2-3 months that hasn't lauded the investment potential of the Russian stockmarket.
Personally I don't know much about investing in Russia nor its economy, apart from it's rich in natural resources. Some refer to the country as a gangster state but whereas that tag is perhaps too harsh there's no doubt some of it at least rings true especially at the moment.
The Hermitage Fund And State Run Russian Corruption
The Hermitage Fund bills itself as the world's leading public equity fund dedicated to investing in Russia. But recently it's been plagued by what it suggests is massive state sponsored fraud designed to steal hundreds of millions of dollars from the fund.
As an article in Business Week reports -
"The most sensational part of Hermitage's allegations is that the attempted larceny was carried out with the direct connivance of officials in the Russian police."
More comment and media articles on the fund's business dealings problems can be found on its website.
Get Out If Things Don't Look Right With Investments
Successful investing and trading is most probably more about common sense than anything else. A good rule therefore when things don't look or feel right is to get out first, then ask questions later.
And it's for this reason that many switched on investors are starting to seriously question and liquidate their Russian stockmarket exposure regardless of the potential for its economy.
What makes these corruption allegations all the more damning is that this fraud is potentially being perpetrated against some of the country's largest foreign investors who are no doubt connected rather than against small businessmen or companies who have little if any influence.
Summary
If I had money invested in the Russian market I would be starting to sell the majority, if not all of my holdings. And if I were considering investing in the country then the Hermitage news would make me reconsider.
Right now there is a lot of risk in the global market place and perhaps capital preservation is more important than capital appreciation for most of us.
Investors just don't need any more risk right now, either real or perceived. This risk to the Russian market right now is loss of confidence by investors which can easily effect stock prices regardless of whether the country shows promise.
