Russian ETFs Brace For More Losses As U.S. Relations Deteriorate

From Zacks: Russia has been in the news over the past two weeks owing to mass protests across major cities against instances of state corruption. It all started when anti-corruption crusader and opposition leader Alexei Navalny posted a video online questioning the massive wealth acquired by the current Prime Minister, Dmitri Medvedev.

Tens of thousands of people took to the streets to rally against widespread corruption. Hundreds of people were detained, put behind the bars, including Navalny who was jailed for 15 days. Navalny also stated that he will be running for the presidential elections in March next year.

The recent protests were the biggest since the wave of protests in 2011 and 2012 and have resulted in political turmoil.

Navalny struck the right chord when he appealed to the masses through a film that was easy to follow. Meanwhile, Putin stated that the fight against corruption should not be used as a tool for opposition parties to gain political support and further their self interests.

Though the elections are still a year away, there is a great deal of political uncertainty in the region. This may as well have an impact on businesses. Let’s discuss a few ETFs, which have a high exposure to Russia (read: Russia Out of Recession: ETFs in Focus).

VanEck Vectors Russia ETF (RSXFree Report)

RSX offers exposure to large and mid cap Russian equities. It might be appealing to investors who are looking to gain exposure to this emerging market nation in spite of the significant volatility risk associated with it.

This fund has AUM of $2.5 billion and charges a fee of 63 basis points a year. The fund is heavy on Energy (37.7%), Basic Materials (16.9%), and Financials (15.7%). It bears significant concentration risk with almost 57% allocated to its top 10 holdings. The fund lost 0.38% year to date and gained 32.55% over the last one year (as of April 5, 2017). It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

iShares MSCI Russia Capped ETF (ERUSFree Report)

This fund offers exposure to large and mid cap Russian equities. It enables investors to gain from the tremendous potential of this BRICS nation if they are willing to accept the tremendous risks that come along with it.

This fund has AUM of $526.99 million and charges a fee of 62 basis points a year. The fund is heavy on Energy (49.7%), Financials (22.6%), and Materials (12.5%). It bears significant concentration risk with almost 60% allocated to its top 10 holdings. The fund lost 1.25% year to date and gained 162.5% over the last one year (as of April 5, 2017). It has a Zacks ETF Rank #3 with a High risk outlook (read: Best and Worst Performing EM ETFs of this Year)

SPDR S&P Russia ETF (RBLFree Report)

This fund is a relatively less popular fund in the space offering exposure to Russian equities.

This fund has AUM of $32.95 million and charges a fee of 59 basis points a year. The fund is heavy on Energy (43.8%), Financials (19.4%), and Materials (12.6%). It bears significant concentration risk with over 65% allocated to its top 10 holdings. The fund gained 0.74% year to date and 34.3% over the last one year (as of April 5, 2017). It has a Zacks ETF Rank #3 with a High risk outlook

To Conclude

Though the discussed ETFs have performed exceptionally well in the past one year, their future is uncertain. Russians seem to have lost confidence in their government amid increased political scandals and elevated corruption issues. We will have to wait and see whether they choose to oust the seemingly authoritarian government next year.

The VanEck Vectors Russia ETF (NYSE:RSX) fell $0.4 (-1.94%) in premarket trading Monday. Year-to-date, RSX has declined -2.92%, versus a 5.22% rise in the benchmark S&P 500 index during the same period.

RSX currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #53 of 77 ETFs in the Emerging Markets Equities ETFs category.


This article is brought to you courtesy of Zacks Research.

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