Russia ETFs Stung by Bank Sanctions

Exchange traded funds tracking Russian equities look poised to finish Tuesday’s trading session at or near the lows of the day after the U.S. announced fresh sanctions against banks.

“The penalties prohibit U.S. persons from transacting with, providing financing for or otherwise dealing in new debt of longer than 90 days maturity or new equity with the three banks,” reports Kasia Klimasinska for Bloomberg, citing the U.S. Treasury Department.

The Market Vectors Russia ETF (NYSEArca: RSX), the largest and most heavily traded Russia ETF, is lower by 1.9% in late Tuesday trading on volume that is well above the daily average. RSX, which is hovering just pennies off its intraday low, had a 12% weight to the financial services sector at the end of the second quarter, according to Market Vectors data.

Financial services is RSX’s fourth-largest sector weight. The new sanctions target VTB Bank OAO, Bank of Moscow and Russian Agricultural Bank. VTB is RSX’s second-largest bank holding after Sberbank. VTB accounted for 3.86% of RSX as of July 28, according to issuer data. Bank of Moscow and Russian Agricultural are not found among the ETF’s 49 holdings. [Russia ETFs Rally in May]

The iShares MSCI Russia Capped ETF (NYSEArca: ERUS) is off 2% in late trading, also on heavy volume. The $298.3 million ERUS allocates 15.7% of its weight to the financial services sector. VTB is the ETF’s ninth-largest holding at a weight of 3.9%, according to iShares data.