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Russian star says oil will slow but consumers grow

Russian consumer stocks are set to boom but commodities are unlikely to repeat last year’s doubling in value, says JP Morgan Fleming Russian securities investment trust manager Oleg Biryulyov.

The trust rose by 103 per cent in 2005 but Biryulyov says many Russian funds benefited from pessimistic oil price predictions, which were exceeded by over 50 per cent on average.

Biryulyov’s fund is underweight in commodities and does not hold Gazprom, the stock linked to the Ukrainian gas crisis, which will make up around 40 per cent of the Russian index when it opens to foreign investors this quarter.

Instead, he is concentrating on financials such as Sberbank Rossii, Russia’s biggest consumer bank, internet provider RBC Information and healthcare provider OAO Pharmacy Chain in an effort to gain exposure to the growth of the Russian middle class and the rise in consumerism.

Biryulyov takes a three-year view on stocks and says a 100 per cent return on each of his consumer stocks is possible over this horizon, helped by a predicted 10 per cent rise in the currency and 5 to 10 per cent GDP growth this year.

He says: “Markets have probably overextended themselves as a result of the oil success and it is not fair to expect similar returns from commodities this year. But consumer stocks should benefit massively from the rise of the consumer over the next three years and the fund is positioned to take advantage of this.”

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