Government-led privatization and reform programs will open up both state and privately owned Russian companies and will turn Russia into a "high-yielding market," Liam Halligan, chief economist at asset-management firm Prosperity Capital, told CNBC.
Indeed, perceptions of risk and reward in Russia should change as new regulations oblige Russia's state-owned companies to pay at least 25 percent of their net profits as dividends in an attempt to attract more investment.
"The world's perceptions of the Russian markets are that it's full of state-run stocks – it isn't. Only about a third of the stocks in the universe of investable companies here are state-run…50 to 60 percent of the index," Halligan said. "When those stocks start to [pay higher dividends] as they are now…That should hopefully lead to perceptions changing that Russia is, these days, a high yielding market."
In December last year, for example, Gazprom announced it would more than double its dividend. The move pushed up the company's dividend yield to 4.5 percent.
But Halligan said investors should look beyond the predominant oil and gas stocks on the benchmark Russian Trading System index (RTS), which has gained 9.7 percent in 2012 after recovering from a volatile year in 2011 when it dropped almost 22 percent.
"There are tremendous stocks and shares beyond the index, some of our food retailers are up 60 to 80 percent this year and transport and infrastructure companies have done very well," Halligan told CNBC on Thursday."We've had double-digit dividend yield in some of our core positions for a number of years."
Russia has unveiled a number of reforms involving privatization and new accounting regulations aimed to making the country appear more investor-friendly to the wider world.
From 2013, global accounting rules, such as International Financial Reporting Standards (IFRS) and General Accepted Accounting Principles (GAAP) will be compulsory for all listed Russian companies. Crucially, Halligan told CNBC's Geoff Cutmore in Moscow, the new rules will apply to the majority of state-owned companies.
"[In Russia] we also have now a centralized Securities Depository that now exists. From early 2013, it will be illegal not to use it -that will give foreign investors a lot of comfort," Halligan said.