Under the Trump Administration, the U.S. has an often controversial and sometimes volatile relationship with Russia, traits that could be heightened in the wake of new U.S. sanctions against Russia.
The VanEck Vectors Russia ETF (NYSEArca: RSX), the largest Russia exchange traded fund trading in the U.S., is off 0.7% over the past week, but for the most part, Russian markets and financial assets have been steady in the wake of the new sanctions.
“After taking a battering in the past two months amid a U.S. push to toughen sanctions, Russian bonds, stocks and the ruble showed signs of recovery this week as Donald Trump reluctantly put his name to the penalties on Wednesday and oil climbed. Russia’s benchmark stock index is heading for its best week since April, bond yields are edging lower and the cost to insure debt against default reached a two-month low,” reports Natasha Doff for Bloomberg.
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).
“Analysts from HSBC Bank Plc and Credit Suisse Group AG said in research notes this week that the political risk is mostly priced in, creating a buying opportunity. Citigroup Inc. warned that the penalties are ‘reflective of an increasingly difficult relationship between Washington and Moscow,’ taking a structural toll on sentiment,” reports Bloomberg.
Russia ETFs are among the worst performers at the single-country this year even as broader emerging markets benchmarks, including the MSCI Emerging Markets Index, rally. Amid the controversy regarding the Trump Administration’s alleged ties to Russia, investors have pulled over $536 million from RSX year-to-date.
On Demand Webcast: Why Commodity ETFs Should Be Part of Your Diversified Portfolio
More important to Russian stocks than the sanctions could be oil prices because Russia is the world’s largest non-OPEC producer. While Russian stocks historically trade at discounts relative to international benchmarks, the ruble is currently one of the cheapest emerging markets currencies.
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.