Why I have half my portfolio in Russia
It can't be repeated too often that investing should be a long-term game. If investors are putting money aside for 10-20 years, short-term fluctuations in share prices should really be seen as distractions. It is the long-term trends that matter most.
In my view the key is to have a well-diversified portfolio and to favour investments that are both cheap and under-owned.
I believe that emerging Europe still ticks both of those boxes. Let's not forget that 2016 was the first good year for the region after an extended five-year rough patch in which it completely fell off the radar screen for many investors.
It might seem difficult to understand how this could happen, when you consider that emerging Europe has a larger population than western Europe, and a larger economy than Germany, but this is often the case with good investment opportunities: they are hiding in plain sight even as the majority of investors herd around whatever type of asset happens to be fashionable at the time.
OUTLOOK FOR 2017
The outlook for Russia in particular (a 58 per cent weighting in the Jupiter Emerging European Opportunities Fund at the end of December), has improved significantly compared to last year - the oil price has rebounded from unsustainably low levels of under $30 per barrel and is currently trading at around $55 per barrel, a level that should be comfortable for Russia and is well above the $40 per barrel assumption that is baked into the Russian budget.
If, in 2017, oil prices simply remain in the $50-$55 range that we have seen since the recent OPEC decision, that would represent a 10 per cent to 22 per cent increase compared to 2016's average price of $45.
This should provide good conditions for the economy to return to growth - which could create stock picking opportunities in domestic-facing companies that have suffered from weak earnings momentum in recent years.
It's too early to tell whether the hopes for US-Russia détente and potential easing of sanctions under president Trump will materialise, but it is worth noting that most US presidents, including Obama, have tended to spend the early part of their presidency attempting to fix US-Russia relations - and this particular president has so far been far more positive in his public statements about Russia than any of his predecessors.
To conclude, on most measures of valuation emerging Europe's markets still look attractive in my view: the Russian market for example has a price/earnings (p/e) ratio of 7, which is in line with its 10-year average.
That is half that of the FTSE All-Share Index, which currently trades on a p/e of 14.6 and is around 20 per cent more expensive than its 10-year average.
To conclude, the structural case for investing in emerging Europe remains as strong as ever, in my view, with regional economies still set to grow faster than those in the West due to lower levels of debt and a competitive cost base.
Colin Croft is fund manager of the Jupiter Emerging European Opportunities fund.