As many exchange traded funds (ETFs) cover emerging markets, Russia may provide too much risk for some investors despite the until-recent success of these emerging market economies. The Russian economy started off strong this year, but a cloud of risk surrounds the country.
Eli Hoffman for Seeking Alpha reports that the Russian Stock Market rose 4% last week, even in the midst of its ongoing feud with Georgia. The Market Vectors Russia ETF (RSX) is down 19.3% year-to-date and tracks the Russian stock market. However, growth over the past week shows investors are more concerned about oil prices than the conflict with Georgia.
This week, the fund is getting socked. On Monday, the fund lost 1.3% and today, it’s down more than 4% midday. It could have something to do with the fact that last week, it looked like the conflict would come to a close pretty quickly. This week, that doesn’t seem to be the case, reports Joanne Von Alroth for Investor’s Business Daily.
Russia’s current situation illustrates the political risk of investing in emerging markets. The risk of government intervention is ever-present and the country is also facing 15% inflation.