One Russia ETF To Look At Right Now
It might be hard to imagine that an exchange traded fund up nearly 43 percent over the past month and more than 50 percent since the start of this year could still be worth buying, but that may just be the case for the Direxion Daily Russia Bear 3X ETF (NYSE: RUSS).
The Direxion Daily Russia Bear 3X ETF attempts to deliver triple the daily inverse performance of the same index tracked by the Market Vectors Russia ETF (NYSE: RSX), the largest and most heavily traded Russia ETF listed in New York. With the United States Brent Oil Fund (NYSE: BNO) down 21.3 percent over the past month and having hit an all-time low Tuesday, RUSS has been benefiting as weak oil prices hamper Russian stocks.
Brent oil is the relevant gauge for Russia stocks and ETFs because the country, one of the largest oil producers outside of the Organization of Petroleum Exporting Countries, prices its crude in Brent terms. According to Bloomberg, RUSS's performance through the first two weeks of 2016 places it among the top 20 U.S.-listed ETFs.
In a sign of just how badly stocks have been slammed to start 2016, coming into Tuesday's trading session, RUSS was not even ranked among the top three Direxion leveraged bearish ETFs on a month-to-date basis. The Direxion Daily S&P Biotech Bear 3X Shares (NYSE: LABD), Direxion Daily Natural Gas Related Bear 3X Shares (NYSE: GASX) and the Direxion Daily S&P Oil & Gas Exploration & Production Bear Shares (NYSE: DRIP) all sported better January gains than RUSS entering Tuesday, according to Direxion data.
"The sector outlook for Russian oil and gas companies is negative for 2016 due to Fitch Ratings' expectation of continued low oil prices, higher taxes, an end to recent oil production growth and a gradually increasing impact from Western sanctions. Leverage metrics for most companies are likely to remain reasonable for their ratings, but the sector's rating outlook is also negative as most ratings are capped by the Russian sovereign's 'BBB-'/Negative rating," said Fitch Ratings in a recent note.
However, traders are sleeping on the bearish Russia fund and that could be a sign there is more upside ahead. RUSS has lost a modest amount of assets in the current quarter and its volume has been dwindling.
For the five days ended January 15, volume in RUSS was nearly 7 percent below the trailing 20-day average and the ETF has averaged redemptions on a daily basis over the past month, according to issuer data.
Russia's worst Soviet-era recession is expected to continue this year, perhaps bolstering the bull case for the bearish RUSS.
"Economists surveyed by Bloomberg, who as recently as late December projected a 0.2 percent expansion in gross domestic product for 2016, now see a 0.5 percent slump, according to the median of 37 estimates," according to Bloomberg.
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