Russian stocks still look cheap. Yes, they have risen dramatically from their low point but they are still a long way from their previous high. Of course, the PE has risen this year but Russian stocks, as represented by the MSCI Russia Index, are still trading at a single-digit PE of 6.8x as at end May 2009 - an increase from an even lower 3.4x as at end December 2008.
Russia and most other markets are in a much stronger position, financially and economically, than they were in 1998. Russia has built up strong foreign exchange reserves and trade surplus that have enabled it to withstand external shocks to its economy.
The Russian market was also affected by the correction in commodity prices due to its high exports of oil and other commodities, as opposed to any extraordinary fear focused on this market. However, we maintain the view that commodity prices will continue to increase in the long term due to greater demand from emerging markets and a relatively inelastic supply. This will thus benefit Russia in the future.
The most important lesson we've learnt from 1998 or any other crisis is that markets always recover - it's just a matter of time. Thus one should always maintain a long-term and patient view with regard to investing.