Russian markets and country-specific exchange traded funds are on a roll after the election of Russia-friendly Donald Trump, appreciating ruble currency and higher oil prices helped strengthen Russia’s outlook.
Over the past month, the VanEck Vectors Russia ETF (NYSEArca: RSX) gained 11.9%, iShares MSCI Russia Capped ETF (NYSEArca: ERUS) rose 13.1%, SPDR S&P Russia ETF (NYSEArca: RBL) increased 11.0% and VanEck Vectors Russia Small-Cap ETF (NYSEArca: RSXJ) advanced 9.4%.
Meanwhile, the Direxion Daily Russia Bull 3x Shares (NYSE: RUSL), which attempts to deliver triple the daily returns of the same index tracked by RSX, jumped 38.3%.
Supporting Russia’s outlook, market observers anticipate a more pro-Russia Trump administration may help ease tensions between two countries and support each others growth.
Trump has no explicitly denounced Russia in its involvement in Ukraine’s civil unrest. Some even believe that the President-elect could even end sanctions on Russian energy and financials once Trump takes office, which could improve Russia’s economic outlook.
Meanwhile, Russian stocks are improving on a stronger ruble and rising oil prices.
Crude oil prices have rallied after the Organization of Petroleum Exporting Countries agreed on production cuts, and non-OPEC members, including Russia, also recently announced they will join the cuts as well to stabilize global prices after a massive global supply glut pressured crude prices.
The improving oil prices have a large effect on Russian markets as many of its largest companies are government-backed oil producers. For instance, RSX’s largest component holdings include Gazprom 8.3% and Lukoil 7.1%, with a 39.7% tilt toward the energy sector.
Further bolstering Russia-related ETFs, the ruble currency is at its strongest against the U.S. dollar in over a year due to the improved oil prices, a key Russian export. The U.S. dollar is now trading at around RUB60.9, compared to a low of RUB82.45 back in January,
Since the Russia country-specific ETFs do not hedge currency risks, a stronger RUB translates to higher USD-denominated returns.
For more information on the Russian markets, visit our Russia category.