Why We're Bullish on Russia and Eastern Europe Right Now

After a challenging 2020 due to the pandemic, foreign direct investment (FDI) has been flowing into Russia this year for a number of reasons. Among them is it offers positive real rates compared to other Central and Eastern European (CEE) countries. At a time when most countries are keeping rates near zero to combat the negative effects of the health crisis, the Bank of Russia is in tightening mode, having raised rates five times so far in 2021, most recently on September 10. This has attracted investors looking for higher yielding instruments.

Average Bond Yields in Central European Countries

The Russian economy has also been supported by stronger oil and gas prices. The price of Brent oil, the international benchmark, has increased about 75% this year through September 15, which has supported some of our favorite Russian oil exploration and production companies. Among them are Rosneft, up 35% as of September 15; Lukoil, up 38%; and Gazprom, up 73%.