The poisonous air in Moscow may be fatal to inhale, there isn’t much wheat to eat and the peat bogs are on fire, but at least there are investment opportunities in Russian equities.

East Capital believes the Russian stock market hit a bottom at the end of June. Since April, that market had been down 15%, not due to anything Russia-specific, but rather to a series of extraneous events such as the wobbly euro, says the Russia and Eastern European specialist fund-management firm.

But the Russia index rebounded more than 10% in July, making the market one of the world’s best performers in that month.

There had been dire prognoses pertaining to Eastern Europe, but there were no sovereign defaults or corporate busts. Countries from the region have emerged with positive growth this year, admittedly with some help from the International Monetary Fund.

Russia put in place an effective fiscal stimulus, and the country will, by conservative government estimates, grow at a rate of 5% this year. Interest rates were cut from 12.5% last year to 7.75%, and real interest rates are positive.

Since the start of 2010, the Russian index is up 5.1%. The market is trading on a seven times price/earnings ratio, with earnings-per-share growth of 35-40%. Russian inflation stands at 6.5%. In local-currency terms East Capital’s Russia fund is up 11%.

“When investors focus just on Russia itself, the market is exceedingly attractive at the current time,” says Michael Hanson-Lawson, Asia chief executive of East Capital in Hong Kong. “It does move, though, in association with other markets, being concerned about a double dip or euro problems, and that’s due to the presence of global equity investors within the market. With turnover of $4-5 billion a day, it’s a big market and it is inter-linked to the others.”

Moreover, a $30 billion programme of privatisation is scheduled to take place later this year and next. In 1996, when the country was on its back and there was a risk the Communists could get back into power, a deal had been struck between businessmen and then-president Boris Yeltsin.

Today, that threat isn’t there and Russia has more of the features of a sophisticated global economy. Hence, this programme will be a more open process of IPO and bidding rather than a series of sale that create or enrich oligarchs. Those tycoons may still bid, but it will be a fair and open procedure.

Alone among the Bric countries, the Russian economy shrank in 2009, by 8%. In that same year, China’s and India’s growth continued to be strong, whilst Brazil’s only fell slightly.

The next presidential election is slated for May 2012. President Medvedev and Prime Minister Vladimir Putin will decide between them who will run on their side. It will be either one of them or a third party, but it won’t involve each of them squaring off against the another. The man who emerges from their choice is the pre-poll front runner, as Russians seem content to stick with the status quo.

Since 2000, when Putin became president, average wages have risen from $100 a month to $650 a month. To put this in perspective, a bottle of vodka has only doubled in price. Yeltsin would approve from his grave. The Moscow air might be toxic, but many are smiling regardless.