As Russia's stock market tanks to a 12-month low, investors could be forgiven for a crisis of faith in the country's investment climate. But business leaders were divided on why the market had sold off.
Russian equities fell to a 12-month low on Friday after US 10-year government bond yields rose above 2.5 percent for the first time since August 2011, on the back of nerves over when the Federal Reserve will begin tapering its bond-buying program.
Jochen Wermuth, founder and CIO of Wermuth Asset Management, said investors were losing faith in the Russian market, but that could present a good buying opportunity.
"Russia is at a record discount of 60 percent to BRICS and a record discount of 30 percent to its own P/E ratios, so what an opportunity," he said.
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"I think that on liquid space, if the US has a cough; Russia has pneumonia so there is real risk of listed assets, liquid assets that will have a crash. The ruble is quite weak, it's good to be short the ruble, it's good to be short Russian liquid assets."
"Russian stocks are trading below five times because Russia's reputation and rule of law are absent. We've done an estimation that Russian assets could be worth $40 trillion more if only Russia adopted the acquis communautaire, if Russia had the rule of law that Norway and Turkey adopted and accepted the court of European law in Luxembourg as its key authority," Wermuth added. "That's $40 trillion by doing one decision."
His comments came as the chief executive of Russia's VTB Bank, Andrey Kostin, said Russian equities could come under further pressure. "If we see further changes from the Fed I think we can expect a worsening situation in the Russian stock market," Kostin told CNBC at the Saint Petersburg International Economic Forum.
"We're not going to see another crisis but there are still a lot of instabilities in the system … and learning from the crisis of 2008 and 2009, we would like to have a pillar of security always, so we want to be more resilient and more protected from any fluctuation in the market," he added.
With Fed Tapering on the horizon, Kostin said he was not alone in his concern over tightening within the credit markets.
"I think the Russian government now wants to take some measures to protect the domestic market," he said. "Still the situation when the market is volatile and the Russian market for stocks [is] decreasing, there are some discounts on stocks for cash," he said.
David Fass, the EMEA chief executive of Macquarie Group, which has already invested $400 million in Russia and plans to invest more, said he was, on the contrary, confident in it as a "growth market."
"The pitfalls about investing here really revolve around selecting the best and right partners," Fass told CNBC at SPIEF, saying that the "greatest opportunities" were presented by growth markets such as Russia.
"So it's really key when we come into a market like Russia that for each of the investments we make we've made sure that we have excellent local partners, that's how we've managed to avoid the pitfalls so far."
He said Macquarie Group's long-term investors were not worried either about Russia's reputation for poor market transparency or corruption, or macroeconomic risks presented by Russia's economic slowdown or Fed tapering.
"We view the industry we're in as a very long-term investment, the vagaries of what's going to happen after tapering is not [relevant to us]. But it's a big challenge for us bringing more private capital into markets like these. … The stability of return and the length of return is far more important to our investors," who were far more concerned with the stability, consistency and transparency of regulations in Russia, areas which President Vladimir Putin pledged to improve during a keynote speech at SPIEF.
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