Russia has become a member of the World Trade Organization, after two decades in the making. This move should take some of the uncertainty out of Russian trade and create a favorable case for investing in the country with funds such as the Market Vectors Russia (NYSEArca: RSX).
“As part of its joining the WTO, Russia will commit to a series of regulations that promise to energize domestic growth and encourage foreign investment, and Russia’s accession could also cement the nation’s efforts around legislative change and domestic reforms that have improved the business climate and raised Foreign Direct Investment,” Van Eck wrote in a recent note.
Foreign business will prosper, with medium-term GDP anticipated to grow by 11%. About 70% of this growth is cited to be from businesses that find lower tariffs and better business conditions in the country of Russia. Those countries that are already in relations with Russia stand to benefit from the latest membership.[What Putin’s Victory Means for ETFs]
However, some corporations and investors are still wary of the WTO membership having as positive impact upon Russia as it did China. Eric Dutram for Zacks reports that many Russian firms are still corrupt and inefficient and unprepared for global competition. As duties are slashed in half over the next few years, those companies may struggle. [Five Global ETFs to Watch]
Nevertheless, the integration into the WTO will liberalize trade policies and give investors some recourse with Russian trade practices.
“It will facilitate investment and trade, help to accelerate the modernization of the Russian economy and offer plenty of business opportunities For both Russian and European companies,” said Karen De Gucht, European Trade Commissioner, in a report. [ETF Chart of the Day: Russia]
ETFs that focus on Russia:
- iShares MSCI Capped Index Fund (NYSEArca: ERUS)
- SPDR S&P Russia (NYSEArca: RBL)
- Market Vectors Russia Small-Cap ETF (NYSEArca: RSXJ)
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.