The Market Vectors Russia ETF (NYSEArca: RSX), the largest and most heavily traded Russia exchange traded fund, followed the broader market lower Tuesday, but the fund has notched an admirable run over the past month.
Add to that, RSX and rival Russia ETFs are seen as beneficiaries of the Federal Reserve’s recent decision to keep interest rates near zero. If markets price in the notion that the Fed will not soon raise rates, that could bring a welcomed retreat in the dollar for RSX.
The combination of a weakening energy outlook and the depreciating currencies are dragging on the ETFs that cover the major exporting countries. For instance, the energy sector makes up more than 40% of the portfolio in RSX. Looking ahead, observers remain cautious over the market outlook. While President Vladimir Putin and other Russian politicians argue that the worst is over, the economy is expected to remain in a recession for the year. Investors are also expressing concern regarding one of Russia’s worst recessions in the post-Soviet era. [More Issues for Russia ETFs]
“Investors added $35.2 million to the Market Vectors ETF in the five days through Sept. 18, the biggest weekly inflow since mid-July. The price has increased 12 percent from a seven-month low on Aug. 24,” reports Taylor Hall for Bloomberg.
Investors could be looking to target some of the cheapest emerging markets. For instance, Russia is currently the cheapest on absolute terms, with a forward P/E ratio for the MSCI Russia Index at 4.9, compared to its 5-year average of 5.2, according to Capital Economics.