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Russian President Vladimir Putin speaks in Moscow's Red Square on May 9, 2012.SERGEI KARPUKHIN/Reuters

Investors are boosting wagers on the largest exchange-traded fund tracking Russian stocks to a record as easing tension in Ukraine and a rebounding ruble lured them back to the cheapest equities in emerging markets.

The number of outstanding shares in the Market Vectors Russia ETF (RSXJ-N) soared 14 per cent from mid-February to 107.3 million at the end of the month, driving its total assets to $1.88-billion (U.S.). The fund, which lost half of its value in 2014, has surged 19 per cent this year. ETFs focusing on Russian stocks and bonds collected $222.2-million in February, the biggest inflows in emerging markets, data compiled by Bloomberg show.

After deserting the nation's stocks last year, investors are returning amid signs that violence is subsiding in eastern Ukraine while a slide in oil, Russia's main export, is being contained. The ruble surged 14 per cent in February, the best performance among more than 170 currencies worldwide, after sliding 46 per cent in 2014. Stocks on the Russia Trading System (RTS) gauge trade at 5.9 times projected 12-month earnings, the cheapest in emerging markets.

"We are seeing that the ruble is stabilizing, oil has recovered from last year's lows, the situation in Ukraine is slowly easing, and the market has not yet priced in all these positive developments to a full extent," Ivan Manaenko, head of research at Veles Capital LLC in Moscow, said by phone on Monday. "As geopolitical tensions ease, investors are thinking that more opportunities in the Russian market will appear."

The cease-fire in Ukraine is "fragile but it seems to be holding," NATO Secretary General Jens Stoltenberg said in Paris on Monday after meeting French President Francois Hollande. Despite "occasional" shelling, there has been a "radical reduction" in violence, Andrei Kelin, Russia's ambassador to the Organization for Security and Co-operation in Europe, said in Vienna.

Demand for Russian assets is rising after a 29-per-cent rally since mid-January in Brent crude, the oil grade used to price the country's main export blend. Money managers raised their net-long positions in Brent for a third week in the period to Feb. 24, data from ICE Futures Europe showed.

Brent trades 40 per cent below its five-year average and the ruble is 44 per cent weaker than in June. International sanctions linked to the separatist conflict in Ukraine are helping to push Russia's economy toward its first recession since 2009. Russia, which denies involvement, has seen reserves decline by 26 per cent in the past 12 months after the central bank ate into the funds to prop up the ruble.

"With the government burning through its reserves while cutting expenditures, along with the soaring inflation and the weak ruble, there's little hope investors will be interested in Russian assets long-term," Sergey Pigarev, an analyst at Rye, Man Gor in Moscow, said by phone. "It's very hard for asset managers to justify putting money in one of the most volatile markets in the world."

Brent for April settlement dropped 4.9 per cent Monday in London, retreating from the highest close this year. The ruble weakened 1.7 per cent as Russia braced for the biggest month of external-debt repayments until at least the third quarter.

The Market Vectors ETF declined 2.5 per cent to $17.37. The Bloomberg index of the most-traded Russian stocks in the U.S. slipped for a second day, dropping 0.1 per cent.

The dollar-denominated RTS gauge in Moscow added 0.8 per cent, extending to 44 per cent its surge since a December low. Companies on the gauge trade at half the average valuation of the MSCI Emerging-Markets Index.

"As geopolitical tensions seem to be going away, investors are again looking at the Russian market with interest," Andrey Shenk, an analyst at Alfa Capital in Moscow, said by phone. "That doesn't mean that the risks connected to Russia are gone, as many economic challenges are still there."