Putin Pause Stokes Inflows to Russia ETFs

Signs of easing tensions between Russia and Ukraine are fueling returns by and investors’ interest in Russia exchange traded funds.

Russia’s Micex Index, one of the most deeply discounted major benchmarks in the emerging world, jumped nearly 10% last month, its biggest monthly gain in three years, amid signs Russian President Vladimir Putin is seeking to ease tension with Ukrian, report Halia Pavliva and Ksenia Galouchko for Bloomberg.

Spurred by a more sanguine geopolitical environment and valuations that are low even by the country’s historical standards, investors poured a net $79 million into all Russia-dedicated funds in May, Bloomberg reported, citing EPFR Global.

Last month, the Market Vectors Russia ETF (NYSEArca: RSX), the largest and most heavily traded Russia ETF, hauled in $121 million in new assets while the rival iShares MSCI Russia Capped ETF (NYSEArca: ERUS) added $51.6 million. [Russia ETFs Could Finally be Buys]

Those inflows could be a sign that investors are finally embracing Russia’s low valuations, a favored calling card of the country’s bulls even as stocks there have stumbled. Year-to-date, RSX is down 10%, but Micex stocks trade at just 5.2 earnings, about half the P/E ratio for the MSCI Emerging Markets Index, Bloomberg reported.