Another Spark For Russia ETFs
Among single-country emerging markets exchange-traded funds, few, if any, have spent more time in the post-election limelight than the VanEck Vectors Russia ETF (NYSE:RSX).
RSX, the largest and most heavily traded Russia ETF listed in New York, was one of last year's best-performing single-country emerging markets ETFs, thanks in large part to rising oil prices. Russia is the largest oil-producing nation outside the Organization of Petroleum Exporting Countries and RSX is reflective of that status with an energy weight of 38.7 percent. That is more than double the ETF's second-largest sector allocation, which is materials at 16.8 percent.
However, oil is far from the only reason RSX and Russian stocks have been on the receiving end of renewed focus since November. Allegations that Russia meddled with the U.S. presidential election cast another controversial light on Russia, but that is not keeping RSX and Russian stocks down.
RSX is up more than 2 percent to start 2017, though that sharply trails the more than 7 percent gained by the MSCI Emerging Markets Index. Still, data suggest professional investors are warming to Russian equities.
Emerging Market Inflows
Citing HSBC, Rareview Macro founder Neil Azous notes, “Emerging markets funds see strong inflows in the week ended Feb. 1, with inflows skewed toward Russia, Mexico, Brazil and Indonesia bond funds as well as into Russia, India and Brazil equity funds.”
In a note out Monday, Azous went on to point out that “fund managers have increased their active allocations to the Russian equity market quite rapidly to a multi-year high level.”
Increased interest in Russia is also reflected in the US-listed leveraged ETFs risk-tolerant traders often turn to position for short-term moves in that country's stocks.
For example, during the five-day period ending Feb. 3, the Direxion Daily Russia Bull 3X Shares (NYSE:RUSS) and the Direxion Daily Russia Bear 3X Shares (NYSE:RUSL) saw noticeable increases in volume.
For example, volume in RUSS over those five days was nearly 56 percent above the trailing 20-day average, while turnover in RUSL was 38.2 percent above the 20-day average, according to Direxion data.
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