Inflation has been a problem for Russia’s economy, but the related exchange traded fund (ETF) is performing smoothly. Market Vectors TR Russia (NYSEArca: RSX) hit a recent high on March 3, 2011, more than a week after the Libyan uprising. [Russia ETFs Get A Kick As Oil Soars, But Look Out.]
Why is Russia faring so well, even compared to other emerging markets? Gary Gordon for ETF Expert explains that Russia’s economy is growing at a brisk 5%. And while estimates tend to peg 2011 closer to 4.5% growth, it remains one of the largest non-OPEC exporter of oil and gas.
Japan’s disaster is on target to boost Russia’s economy as well, as the country will need to import about 5 million barrels of oil a day, and infrastructure will put pressure on the iron ore and steel markets, both of which Russia is rich with.
Meanwhile, the unrest in Libya is spilling over into Russia as tensions between Russian President Dmitry Medvedev and his predecessor Prime Minister Vladimir Putin had the two arguing publicly over the merits of military action against Moammar Gadhafi’s regime. While Defense Secretary Robert Gates praised Russia for abstaining on the UN vote that paved the way for a no-fly zone in Libya, Putin condemned the UN resolution as a “medieval call to crusade.” Geopolitical risk is still a large factor in Russia, as corruption still dominates the country.
Facts to consider about Russia:
- Oil rich country and economy is highly reliant on energy prices
- Russia ETFs hold as much as 40% of their assets in the energy sector
- With oil above $100 a barrel, GDP is projected to hit 4.3% in 2011
- Oil and gas make up half of Russia’s revenue and more than 60% of its exports
- Social and economic disparity continues to undermine the government’s goal of social economic reforms
- Recently opened doors to foreign investments [Russia ETFs Heal Their Wounds.]
Focused ETFs:
- Market Vectors TR Russia (NYSEArca: RSX) up 4.6% over one month
- SPDR S&P Russia (NYSEArca: RBL) up 5.6% over one month
For more information on Russia, visit our Russia category.
Tisha Guerrero 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.