Up nearly 30% year-to-date, the VanEck Vectors Russia ETF (NYSEArca: RSX) is easily one of this year’s best-performing single-country emerging markets exhange traded funds. While RSX, the largest and most heavily traded US-listed Russia ETF, is on pace for its best annual performance in several years, that does not mean Russian stocks have exhausted their upside potential.
Russia ETFs have impressed this year, particularly when considering market observers widely expect Russia’s worst post-Soviet era recession to extend throughout this year. Onlookers 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. Russia’s GDP is expected to contract again this year, extending what is becoming a lengthy recession.
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Investors could also be lured back to RSX and Russian stocks due to some of the emerging world’s cheapest valuations. RSX is home to some of the emerging world’s least expensive stocks. The largest Russia ETF trading in the ETF allocates over 37% of its weight to energy stocks, by far its biggest sector weight.
Although Russia’s credit rating has been pressured in recent years, that situation may be turning for the positive as well.