Shares of the Market Vectors Russia ETF (NYSEArca: RSX) are off nearly 9.8% Monday on volume that has already surpassed the average daily turnover on news that the probability of a Russian sovereign debt default is rising.
Underscoring just how tenuous the situation is with Russian equities, RSX is not Monday’s lone offender among Russia ETFs. The SPDR S&P Russia ETF (NYSEArca: RBL), which is off 9.3% while the iShares MSCI Russia Capped ETF (NYSEArca: ERUS) is lower by 9.4%. Of the five worst-performing non-leveraged ETFs to this point in Monday’s trading session, all five are Russia ETFs, or in the case of the iShares MSCI Emerging Markets Eastern Europe Index Fund ETF (NYSEArca: ESR), an ETF with significant exposure to Russian stocks.
Although Russia has $38 billion of dollar-denominated government of which just $6 billion of interest and principal payments is due next year, there concerns linger that Russia is flirting with another financial crisis.
“Last Monday, the probability of a default on the debt of the Russian Federation was ~20%. By the close of business on Friday that jumped all the way up to ~25%. Psychologically, a 1 in 5 probability changed to 1 and 4 likelihood in just five days. That is a big move. The default probability at the time of writing is ~28.5%, a 3.5% jump since last Friday,” said Rareview Macro founder Neil Azous in a research note out today.
Earlier Monday, the careening Russian ruble slid 4% to fresh lows against the U.S. dollar as the American depositary receipts of energy giant Gazprom and Sberbank tumbled. Those stocks combine for 13.7% of RSX’s weight. [Getting it Wrong With Russia ETFs]