Exchange traded funds tracking Russian equities have predictably slumped in the aftermath of news that pro-Russian separatists are believed to be the culprits behind the downing of Malaysia Airlines Flight 17 that killed nearly 300 innocent people.
Over the past five trading days, the Market Vectors Russia ETF (NYSEArca: RSX), largest Russia ETF, is down 7%, but investors have not been scampering for the exits. At least not yet and not for noteworthy size.
Last week, RSX lost $22.5 million while the iShares MSCI Russia Capped ETF (NSYEArca: ERUS) saw withdrawals of $10.2 million. No capital was pulled from the SPDR S&P Russia ETF (NYSEArca: RBL). However, those modest outflows are a contrast to the surprising inflows to RSX seen in early March when Russia invaded Ukraine. From March 3 through March 8, investors poured $195.5 million into RSX. [Russia ETFs Fall After Ukraine Invasion]
Renewed geopolitical tension in Eastern Europe could have a different effect on Russia ETFs this time around. The West is promising expanded economic sanctions against Russia U.S. Secretary of State John Kerry has overtly accused Vladimir Putin’s government of support the separatists behind the downing of Malaysia Airlines Flight 17, indicating that tensions in Eastern Europe could remain elevated in the near-term. [Gold Gains on Geopolitical Tensions]
“Russia’s relations with the rest of the world are deteriorating four months after his annexation of Ukraine’s Crimea region sparked Europe’s biggest geopolitical crisis since the end of the Cold War,” report Volodymyr Verbyany, Ilya Arkhipov and Aliaksandr Kudrytski for Bloomberg.
Earlier this year, Russia ETFs surged soon after the Ukraine conflict as investors bought into funds due to some of the lowest valuations in the emerging world and speculations of oversold conditions. From March 20 through July 18, RSX surged 14.6%, making one White House press aide’s bearish call on Russian stocks look not only inappropriate, but foolish as well. [Poor ETF Advice From the White House]
The theme of Russia’s isolation in the wake of the Malaysia Airlines Flight 17 tragedy has also stoked renewed interest in leveraged Russia ETFs. Entering Monday, the Direxion Daily Russia Bear 3x Shares (NYSEArca: RUSS) was Direxion’s second-best bearish fund this month while the Direxion Daily Russia Bull 3x Shares (NYSEArca: RUSL) was the firm’s second-worst bullish ETF, according to issuer data.
Volume in RUSS over the past five days jumped almost 90% above the 20-day average while volume in RUSL was higher by 80.4% over the past week, according to Direxion data.
Market Vectors Russia ETF
