The explosive conflict between Russia and Georgia has exacerbated some fund managers’ reservations on investing in the country while others believe the region is offering historically cheap buying opportunities on the back of a further sell off.

Jupiter’s Eastern European Opportunities manager Elena Shaftan, who holds a position in Bank of Georgia within her Global European Euro Select Sicav, said the events of the past week would increase Western investors’ concerns over Russia but should ultimately have little long-term impact on returns. She said: ‘Having already suffered a 20% fall since May the Russian stock market has dropped a further 10% in the past two days on the back of the military action. It is clearly a very upsetting event that has led to indiscriminate market selling and Russia’s perception in the West will suffer as a result.’

Baring’s Citywire AA-rated Eastern Europe manager Dr Ghadir Abu Leil-Cooper also did not expect the conflict to have a significant long-term impact. She said: ‘The South Caucasus is not a major economic centre for Russia, and none of the firms we invest in have significant operations in the region.’

However, Aberdeen Asset Management’s head of global emerging markets Devan Kaloo reiterated why the group was underweight Russia. He said: ‘Recent headlines haven’t really affected our view of investing in the country.

'We have been significantly underweight Russia for some years, largely due to concerns regarding corporate governance, financial disclosure, treatment of minorities and the growing role of the state in the private sector.’