Grab Growing Online Sales in an Unexpected Place: Russia | ETF Trends

Technology has performed in 2020 despite the pandemic, a narrative which has held true internationally, especially in Russia. In this case, online sales have been a key driver despite the pandemic causing doom and gloom in the country’s economy, all to the aid of the VanEck Vectors Russia Small-Cap ETF (RSXJ).

RSXJ seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® Russia Small-Cap Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index includes securities of Russian small-capitalization companies. It will normally invest at least 80% of its total assets in securities of small-capitalization Russian companies.

Summarily, RSXJ gives investors:

  • A Small-Cap Focus: Small-caps may offer greater exposure to domestic growth, less exposure to global cyclicals.
  • Value Opportunity: Russia’s equity market is currently offering deep discounts when compared to other emerging markets.
  • A Pure Play: Fund companies must be incorporated in or derive at least 50% of total revenues from Russia to be added to the index.

Given the fund’s strong performance in 2019 (per Morningstar numbers at 38%), it’s easy to see the potential that RSXJ can bring, especially for the ETF investor looking to diversify portfolios with value-oriented international exposure through emerging markets. Looking at its technical chart, there’s been some interest in the month of November with higher volume, which in turn helped prop RSXJ past its 50-day and 200-day moving average.

RSXJ is heading into overbought territory per a relative strength index (RSI) filter on its YTD chart, so a buying opportunity may be ahead. Since the pandemic sell-offs back in March, the fund is recovering slowly even as a second wave of COVID-19 cases is taking hold of global economies.

RSXJ Chart

Higher Online Sales Helped Keep Russian Economy Afloat

Online sales will be a key driver as the “traditional economy will be badly hurt this year by the double whammy of the oil price collapse and the coronavirus (COVID-19) epidemic, but the growth of online sales has almost completely ignored the multiple crises and continues to expand at double-digit rates. Indeed, if anything it has only accelerated,” according to an Intellinews report.

“2019 e-commerce sales as a share of retail sales in Russia reached just 6% vs 8% in Poland, 15% in US and 28% in China,” said Oksana Mustiatsa, an e-commerce analyst with Sova Capital. “Multi-category players accounted for less than 20% of the e-commerce market in Russia in 2019, vs 50% in US and over 70% in China.”

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