Since this spring, Russia’s exchange traded fund (ETF) has been in a free-fall, dropping off 46.6% following its May 19 high. Market Vectors Russia (RSX) is also down 38.6% year-to-date.
The fund’s weighting in certain sectors that have fallen on hard times hasn’t helped, either: it has 39% in oil and gas companies, 22.3% in metals and 13% in telecom. Russia’s well-being hinges on energy, says Trang Ho for Investor’s Business Daily.
The sector accounts for one-fifth of GDP, which rose 8.1% last year. Oil and gas generated 65% of export revenues and made up 30% of all foreign direct investment in the country, according to the World Bank and IMF. This year’s GDP is forecast to grow by 7%.
It’s a reversal of fortune for the country and the fund, as it was the darling of investors earlier this year. It rose 15.1% from the start of the year through May, when it began its descent. Equity funds have been losing assets, and as of Sept. 5, outflow totaled $859 million.
Considering that investors are still pulling money out in light of the political situation right now, a rebound for the fund is unlikely anytime soon, according to a Merrill Lynch research report.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.