Russia and country-specific exchange traded funds may be putting the worst behind them as the economy and financial markets begin to stabilize.
After plunging over the past year, Russia ETFs are beginning to turn around. Year-to-date, Market Vectors Russia ETF (NYSEArca: RSX) rose 11.4%, iShares MSCI Russia Capped ETF (NYSEArca: ERUS) gained 13.4% and SPDR S&P Russia ETF (NYSEArca: RBL) increased 9.8%.
Finance Minister Anton Siluanov believes the worst is over for the Russia’s economy after plummeting oil prices and Western sanctions triggered a mass exodus from Russian assets, reports Olga Tanas for Bloomberg. [Most Great Investments Begin in Discomfort: Is Russia Turning a Corner?]
“The negative peak is behind us and instead we are seeing certain signs of stabilization,” Siluanov said. “The situation in the financial sector is also stabilizing. We see rising returns on debt markets, and the financial market is showing momentum toward growth.”
Russia’s Micex Index has jumped 16.6% so far this year.
The Russia-related ETFs, though, are still tied to the swings in the oil markets as the energy sector makes up the largest component at over 40% in each of the funds. While the financial sector may be stabilizing, financials are only the third largest component in the Russia ETFs, accounting for 11.8% of RSX, 14.2% of ERUS and 10.5% of RBL.
The country will still have to grapple with diminished consumer demand, which is on track for the largest drop in over two decades, as inflation remains at an elevated 16.7%. However, the consumer sector’s health may have a smaller impact on the ETFs as it makes up 10.1% of RSX, 5.9% of ERUS and about 10% of RBL.