Slumping oil prices have sent the VanEck Vectors Russia ETF (NYSEArca: RSX), the largest Russia exchange traded fund trading in the U.S., lower by 7% this year, but the Russia ETF has recently shown signs of rebounding. RSX is higher by 3% over the past week.
Alternatives to RSX, also the most heavily traded Russia ETF, include the iShares MSCI Russia Capped ETF (NYSEArca: ERUS) and the VanEck Vectors Russia Small-Cap ETF (NYSEArca: RSXJ).
Slumping oil prices are also hampering Russian equities, which is not surprising because the country is the largest oil producer that is not a member of the Organization of Petroleum Exporting Countries (OPEC). RSX allocates close to a third of its weight to energy stocks, including the country’s giant state-run energy firms.
“For the first half of the year 2017, the Russian stock market demonstrated the worst dynamics among the countries with developing markets with a result of -13%, losing even to Brazil, which was severely affected by the political crisis. The dollar-denominated Russia Trading System (RTS) index is now at the level of June 2016. Therefore, an investor should ask himself: isn’t this market too oversold?,” according to Seeking Alpha.
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. Of course, there is considerable controversy surrounding Trump’s alleged ties to Russia, a scenario that has provider the media with ample fodder and could be playing a role in hampering Russian stocks at a time when emerging markets equities are surging.
Related: Russia ETFs Try to Find Their 2016 Groove
The good news is Russia’s economy is showing signs of strength.
“The growth of the Russian industrial production in May totaled 5.6% YOY showing the best result for the past three years. Partly this was due to statistical and one-time factors. For example, there were 20 working days in May 2017 as compared to 19 working days in May 2016. Abnormally cold weather in May also provided support to the public sector. Nevertheless, it is noteworthy that for the first time in two years, all the key sectors of the economy demonstrated positive dynamics of growth,” according to Seeking Alpha.
Aggressive, risk-tolerant traders can consider 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.
For more news on Russia ETFs, visit our Russia category.