ETF Trends
ETF Trends

For the short term, Russia’s companies are inching up manufacturing output, but over the long run, banking and oil could be what bring the economy and related exchange traded fund (ETF) back up to speed.

  • For the first time in 14 months, Russian manufacturing grew in September as new business and output expanded, reports Alex Nicholson for Bloomberg. Moscow-based bank VTB Capital reported the Purchasing Managers’ Index advanced from 49.6 to 52 last month. A reading above 50 means growth.
  • The Russian economy is dominated by resources and banking, comments Levi Folk for Financial Post. Thanks to OPEC production quotas, Russia is now the largest oil producer globally.
  • Economists believe Russia’s GDP growth may gain a foothold as soon as the fourth quarter because of fiscal stimulus. Additionally, the economy will pick up speed once oil prices increases and world economies recover.
  • On Sept. 29, the Central Bank reduced its main interest rate to prod lending.

On the flip side, Finance Minister Alexei Kudrin believes it will take three to four years for a full recovery. Standard & Poor’s stated that the Russian banking industry is “structurally weak” and still faces risks. Company loan delinquencies rose to 5.7% of total lending in September, up from 5.3% the previous month, and the ratio for consumer loans increased to 6.2% from 6%.

The country’s economic output may remain below trend for the next several years as the government tries to mend the shortfall from its collapsed economy by spending.

  • Market Vectors Russia ETF (NYSEArca: RSX): up 109.6% year-to-date

ETF RSX

For more information on Russia, visit our Russia category.

Max Chen contributed to this article.

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.