Among global markets, Russian stocks and country-specific exchange traded funds have been among the best performers as a rebounding crude oil prices and a potentially friendlier Donald Trump administration helped revive the ailing emerging markets.
However, some of the enthusiasm for the Russia ETF has waned this year. For example, the VanEck Vectors Russia ETF (NYSEArca: RSX), the largest Russia ETF trading in the U.S., is lower by 5.4% year-to-date.
Oil prices have rallied as growing economies devour raw materials to fuel their growth and recent plans to cut production from the oil cartel, the Organization of Petroleum Exporting Countries, along with other non-OPEC members.
Crude oil has played a significant role in Russian markets as many state-owned oil producers rank among the largest holdings among Russian country-specific ETFs.
“With allegations of Russian influence in the presidential election and among members of the Trump administration, U.S. economic sanctions imposed on Russia over its annexation of Crimea may not be lifted soon. Russia’s support of the regime in Syria leaves the U.S. State Department cold,” reports Dimitra DeFotis for Barron’s.
President Donald Trump has acted more friendly toward Russia and Russian president Vladimir Putin. Consequently, market observers are speculating that the Trump administration could be more willing to roll back sanctions placed on Russia in response to its actions against Ukraine.
Alternatives to RSX, also the most heavily traded Russia ETF, include the iShares MSCI Russia Capped ETF (NYSEArca: ERUS), SPDR S&P Russia ETF (NYSEArca: RBL) and the VanEck Vectors Russia Small-Cap ETF (NYSEArca: RSXJ).
More aggressive traders have also turned to the Direxion Daily Russia Bull 3x Shares (NYSE: RUSL), which attempts to deliver triple the daily returns of the same index tracked by RSX. The Direxion Daily Russia Bear 3x Shares (NYSEArca: RUSS) looks to deliver triple the daily inverse returns of that index on a daily basis.
“Tighter economic constraints are not likely to dissuade Russian President Vladimir Putin from engaging in future foreign policy adventures … as Washington reengages with Moscow, it must not run roughshod over Russia’s neighbors,” according to a Foreign Affairs magazine piece cited by Barron’s.
As is often the case, Russian stocks trade at noticeable discounts to broader emerging markets benchmarks. RSX has a trailing 12-month P/E ratio of just 9.49, according to issuer data.