“Investors don’t expect a quick solution to the crisis, but the market assumes that there will be no new sanctions against Russia as long as the talks continue,” Igor Nuzhdin, senior analyst at OAO Promsvyaz Bank in Moscow, said by phone yesterday. “If you take out geopolitical risk, most of Russia’s biggest companies look fundamentally attractive to long-term investors.”

Short interest in the Market Vectors Russia ETF, a measure of stock borrowed to bet that it will fall, was 5.5 percent of outstanding shares as of Aug. 26, the lowest in a month, according to data compiled by Markit, a London-based research firm. It surged to a record 21 percent in March at the outset of the Ukraine conflict.

‘Performance Gap’

RTS index futures expiring next month dropped less than 0.1 percent to 125,740 in U.S. hours yesterday. The RTS Volatility Index, which measures anticipated swings in stock futures, rose 0.2 percent to 31.95. The Market Vectors Russia ETF, slipped 0.5 percent to $25.12. The Micex Index fell 1.9 percent to 1,420.46 by 3:21 p.m. in Moscow today, the sharpest slide since July 21 on a closing basis.

Investors poured a net $114 million into Russia-dedicated funds this month through Aug. 25, the highest monthly inflow since March, with the bulk coming mid-August as Russian forces appeared to pull back from the Ukraine border, said Cameron Brandt, research director at EPFR Global, a Cambridge, Massachusetts-based company that tracks fund flows.

“The performance gap between Russian equities and those of emerging markets in general is inviting, especially if you believe events in Ukraine will resolve themselves without getting close to the worst-case scenarios,” Brandt wrote in an e-mail yesterday. While emerging-market stock funds tracked by EPFR rose 10.4 percent this year though Aug. 21, Russia- dedicated equity funds fell 10.6 percent, he said.

‘No Breakthrough’

Russia funds lost $950 million this year through Aug. 25, compared with outflows of $2.4 billion in the same period in 2013, Cameron said. The funds drew $380 million in March as investors were shorting Russian stocks ahead of the annexation of Crimea that month, according to data compiled by EPFR.

Russian equity funds reported outflows every month from August 2013 through February 2014 as well as in April and May this year, according to data compiled by EPFR.

Companies on the Micex trade at a 57 percent discount to the multiple for stocks on the MSCI Emerging Markets gauge, according to data compiled by Bloomberg. The discount shrunk from a six-year high of 59 percent on Aug. 7.