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Investors looking for strong returns in 2009 should consider the low valuations in the Russian equities market, according to Jupiter.

Elena Shaftan, head of Jupiter’s Emerging European Equities team, said the Russian market was likely to be a strong performer this year as economic conditions improved.

She said: “The factors that drove the market down last year – the devaluing rouble, falling oil prices and forced selling by over-leveraged domestic investors – have largely played out.

"Valuations are highly attractive – Russia is trading at a discount of about 45 per cent to global emerging markets."

The recommendation came as Morningstar recognised Russia as the top-performing European equities category during the first quarter, with the average fund returning 8.8 per cent over the period.

Ms Shaftan said the rouble was also likely to prove more stable after it was devalued towards the end of January, particularly if oil prices stabilise as well, increasing the level of investment in the economy.

"This reduces capital outflows, particularly the speculative holding of dollars, allowing funds to flow into the real economy and creating scope for economic indicators to improve."

Ms Shaftan said her team had increased exposure to Russian equities across their portfolios from 30 per cent to approximately 45 per cent at the end of March.

She added: “Regional markets have started to recover, but valuations are still far from reflecting the mid-term growth potential of eastern European economies.

"The aftermath of a financial crisis can create opportunities for equity investors, as valuations are driven to unjustifiably cheap levels relative to earnings that are at the bottom of the cycle."

But the outlook for other countries in the region was less clear, as the average fund in the Morningstar Emerging Europe ex-Russia category posted losses of 16.9 per cent during the first quarter of 2009.

Ms Shaftan said the team had avoided countries like Ukraine, Hungary, the Baltic states and the Balkans, which depend more on capital inflows or exports.

But a number of these countries continued to receive support from other countries to cover short-term funding gaps, she said, making them attractive markets in the long term.

She said western governments and financial institutions were likely to pour money into the region to protect the investments of western banks.