Getting single-country exposure with a tilt toward value can occur in practice if ETF investors know where to look. One country worth betting on is Russia via a pair of ETFs: the VanEck Vectors Russia ETF (RSX) and the VanEck Vectors Russia Small-Cap ETF (RSXJ).
“Russia’s economy may return to pre-crisis levels by autumn and overall gross domestic product growth this year could reach around 3.7%, Andrey Kostin, chief executive of the country’s second biggest bank VTB, said on Monday,” a Reuters article said. “The International Monetary Fund has praised Moscow’s efforts in tackling the economic effects of the COVID-19 pandemic, with an increase in borrowing and spending coupled with a soft monetary policy resulting in a GDP fall of 4%.”
“As commodities prices, the lifeblood of the Russian economy, are generally on the rise as a result of renewed demand, GDP growth is seen at around 3.7% this year, Kostin said during a virtual meeting of the World Economic Forum,” the article added.
The RSX and RSXJ ETFs
RSX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Russia Index. The index includes securities, which may include depositary receipts, of Russian companies.
A company is generally considered to be a Russian company if it is incorporated in Russia or is incorporated outside of Russia but has at least 50% of its revenues/related assets in Russia. Such companies may include medium-capitalization companies.
Overall, RSX provides exposure to:
- The Nation’s First ETF Focused on Russia: Largest, most liquid Russia ETF versus competing U.S.-listed ETFs
- A Value Opportunity: Russia’s equity market is currently offering deep discounts versus emerging markets on average
- A Pure Play: Companies must be incorporated in, or derive at least 50% of total revenues from Russia to be added to the index
The fund is up 18% within the last few months:
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.
- Pure Play: Fund companies must be incorporated in or derive at least 50% of total revenues from Russia to be added to the index.
RSXJ is up 12% the last few months:
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