The Market Vectors Russia ETF (NYSEArca: RSX), the largest and most heavily traded Russia exchange traded fund, is trading lower by 1.3% during Friday’s after-hours session after Moody’s Investors Service lowered its rating on Russia’s sovereign debt to junk status.
(1) The continuing crisis in Ukraine and the recent oil price and exchange rate shocks will further undermine Russia’s economic strength and medium-term growth prospects, despite the fiscal and monetary policy responses;
(2) The government’s financial strength will diminish materially as a result of fiscal pressures and the continued erosion of Russia’s foreign exchange (FX) reserves in light of ongoing capital outflows and restricted access to international capital markets;
(3) The risk is rising, although still very low, that the international response to the military conflict in Ukraine triggers a decision by the Russian authorities that directly or indirectly undermines timely payments on external debt service.
Moody’s completes the trifecta of major ratings agencies that have assigned junk credit ratings to Russia.
Last month, S&P lowered its rating on Russian debt to BB+, the highest junk rating, from BBB-, the lowest investment grade. That was after Fitch Ratings lowered Russia’s sovereign credit rating to BBB-, the lowest investment grade, with a negative outlook. Fitch previously rated Russian sovereign debt BBB. [Russia ETFs Fall After Fitch Downgrade]