Russia ETFs Could Be Pressured Amid Rising Sanction Threats

Russia ETFs have strengthened in recent weeks, but the threat of potential sanctions could drag on the emerging market.

Over the past month, the VanEck Vectors Russia ETF (NYSEArca: RSX) gained 6.6% and iShares MSCI Russia Capped ETF (NYSEArca: ERUS) rose 7.2%.

Despite its recent rebound, Russian markets still face hurdles. Russia’s largest lenders, state-owned Sberbank and VTB, saw outflows of foreign currency deposits in August on a depreciating rouble currency and rising concerns over new U.S. sanctions, Reuters reports.

“Moderate funding outflows from larger state banks were presumably driven by concerns over potential new sanctions,” Fitch ratings said in a note.

Anxiety over an extension of U.S. sanctions on Moscow has sent the rouble to its lowest levels since 2016. Traders may be concerned that the sanctions would possibly target Russian state banks and holdings of Russian government bonds.