Moscow city skyline is seen against an autumnal sunset, October 18, 2011. REUTERS/Anton Golubev
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Russia is returning from the investment wilderness after last year's oil price collapse and Western business sanctions with funds attracted by falling interest rates and a light 2016 debt repayment calendar.Those who braved Russian markets this year are already in line to scoop dollar-based returns of 15-20 percent on equities and bonds, among the best in the world.But this merely represents recovery after a horrific 2014 that saw the ruble crash by 40 percent, $150 billion capital outflows and the specter of default by Russian companies that had borrowed heavily in dollars.Thanks to the ruble's bounce from record lows and five interest rate cuts, Russia tops this year's local emerging debt league tables with 20 percent returns, but similar gains can be expected in 2016, says JPMorgan which advises clients to hold more Russian debt than the country's weight in the index.Reuters polls forecast end-2016 inflation at 8 percent, from about 13 percent now, while interest rates are seen dropping to 8 percent from 11 percent.Adjusted for inflation, Russian government spending should contract 5 percent next year after a 15 percent fall in 2015, savagely compressing price growth and making domestic debt a good structural trade, said David Hauner head of EEMEA debt and strategy at Bank of America Merrill Lynch.
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