On May 7, Vladimir Putin stepped down and Russia’s new president became Dmitry Medvedev – is it any coincidence that in one day, the Russia exchange traded fund (ETF) rose 4.4%?
Market Vectors Russia (RSX) seems to be a beneficiary of the surge in energy prices in particular, as 43.1% of the fund is allocated in the sector. It’s up 6.4% year-to-date.
Foreign investors, attracted by the record-high oil prices, are turning a blind eye to the country’s expulsion of U.S. diplomats and threats of a war with Georgia, reports Peter Apps for Reuters. The expulsions were ordered on April 28 after the United States expelled three diplomats earlier in April. The back-and-forth is bringing back Cold War memories.
Some investors might be deterred by Russia’s issues, especially when compared with other emerging markets such as Brazil, which has the growth without the political risks. And those investors who are concerned with the oil and energy sector in Russia are focusing on other sectors such as construction and retail.
An ETF is a good way to get exposure to several sectors – the diversification means you could potentially benefit from any growth, while avoiding too much risk if it doesn’t pan out.