Schroder stays overweight Russian equities

LONDON (Reuters) - Schroder Investment Management is remaining overweight Russian equities as recent stock market falls provide a buying opportunity, the fund manager's head of emerging markets equities said on Wednesday.

Allan Conway said a 30 percent fall in Russian equities since May made the stock market's valuation levels attractive.

"The market has a prospective PE (price/earnings) ratio of 6.5 times. It's the cheapest in the global emerging markets MSCI index .MSCIEF, against overall global emerging markets levels around 11 times," Conway said.

"We find those valuations very compelling."

Schroders manages more than $28 billion globally in emerging equities, including a dedicated global emerging market equity fund with more than $5 billion under management.

The benchmark for many emerging equities investors is MSCI's emerging equities index, and Conway said the fund was overweight Russia by 2.5 percent against the index.

"Russia remains one of our largest overweights, by a very wide margin."

Investors have pointed to commodity price falls, corporate disputes and conflict in Georgia as reasons to stay away from Russian assets.

Russia is the world's second-largest exporter of oil, which has fallen 20 percent in the past month from record highs above $140 a barrel.

"We have fallen from $140 to $110, people think Russia is really badly affected. The reality is that Russia is still doing extremely well," Conway said.

Even if oil went below $100, Russia would continue to do extremely well."

Oil was trading below $70 a barrel a year ago.

Investors have also worried about government interference in the affairs of Russian mining company Mechel (MTL.N) and oil firm TNK-BP, with memories of YUKOS, the once-mighty oil company destroyed by massive back tax claims.

"We think these echoes of YUKOS are somewhat overdone -- there is already a lot of risk in the price," Conway said.

Schroders was slightly overweight in energy sector stocks, with some caution due to expectations of further commodity price falls, overweight in financials and telecoms but underweight materials, Conway said.

The conflict with Georgia also provided little reason to sell Russian stocks, Conway added, noting that the Israeli-Palestinian conflicts have had little impact on Israeli stocks.