Although just two of this week’s trading days are in the books, it is fair to say it has been wild one for Russia exchange traded funds.
On news of Russia’s invasion of neighboring Ukraine, Russian equities tumbled Monday, falling to levels not seen the darkest days of the Lehman Brothers crisis and the country’s 2008 conflict. Russian gas giant plunged 14% while Sberbank, one of Russia’s largest banks, slid 15%. Both stocks are significant holdings in ETFs such as the Market Vectors Russia ETF (NYSEArca: RSX) and the iShares MSCI Russia Capped ETF (NYSEArca: ERUS). [Russia ETFs Slide Following Ukraine Invasion]
Those declines were, of course, good news for the Direxion Daily Russia Bear 3x Shares (NYSEArca: RUSS), but as Ukraine tensions ebbed Tuesday, the Direxion Daily Russia Bull 3x Shares (NYSEArca: RUSL) took the spotlight, soaring 10.6% on better than 12 times the average daily volume.
“Along with tensions in Ukraine, creation units and trading interest in Russia has increased,” said Direxion.
RUSS ended February as Direxion’s top-performing triple leveraged bearish ETF and saw modest creation activity last Friday, according to issuer data.
“But trading is about finding inefficiencies, and some think investors have overreacted. Contrarians may bet that a diplomatic solution is Russia’s only option, as trade dependencies make war too costly for Putin. Like it or not, Europe is Russia’s largest energy customer. This trade fact, promotes peace over war. So if diplomacy prevails, the bulls are betting on upside opportunities for oversold Russian stocks,” said Direxion.
One thing is certain: The conflict in Ukraine has sparked increased interest in leveraged Russia ETFs.
Heading into Tuesday’s session, RUSL’s five-day average volume as a percentage of its 20-day average volume was 215.3% while the equivalent number in RUSS was 114.3%, according to Direxion data.
In a sign that some traders are betting on a Russia rebound, RUSL has seen inflows over the past month while RUSS has lost cash.