+ 2.03
+ 0.61%
+ 2.82
+ 0.84%
+ 3.01
+ 0.74%

Bring Some Excitement To An Already Exciting Emerging Market

July 9, 2019 11:32 am
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Bring Some Excitement To An Already Exciting Emerging Market

On the geopolitical front, Russia is familiar with controversy and that controversy has a way of overshadowing the country's investment opportunities. Year-to-date, the MVIS Russia Index (MVRSXTR) is up 28%, or more than triple the returns of the MSCI Emerging Markets Index.

What Happened

Strength in Russian equities creates opportunity with the Direxion Daily Russia Bull 3X Shares (NYSE:RUSL), the king of leveraged Russia exchange-traded funds. RUSL attempts to deliver triple the daily returns of the MVIS Russia Index.

With that index up nearly 8% this month, RUSL is doing its job with a month-to-date return of just over 24%. Interestingly, data indicate traders are bailing on RUSL as the ETF is surging.

“However, while RUSL is one of the top performers of Direxion’s stable of leveraged ETFs for 2019, thanks in large part to this recent surge, it’s also seen some of the heaviest investor outflows at -$60 million in net redemptions over the course of June, with more than two-thirds of that occurring in the days following its new 52-week high,” said Direxion in a recent note.

Why It's Important

RUSL has a bearish counterpart, the Direxion Daily Russia Bear 3X Shares (NYSE:RUSS), which looks to deliver triple the daily inverse returns of the MVIS Russia Index. Of course, as RUSL surges, RUSS is getting drubbed, but some traders are nibbling at the bearish Russia ETF.

“RUSS has seen a modest uptick in investor interest with just over $10 million in flows over the course of June,” said Direxion.

Russia is one of the world's largest oil producers, but stocks there are significantly overshooting oil's July gains. For example, Brent crude is higher by just over 4% this month, barely more than half the gains accrued by the MVIS Russia Index.

What's Next

“However, Russia bulls should remain abreast of factors that could spoil energy’s resurgence. For one, while U.S. oil inventories experienced their largest weekly reduction of 2019 at 12.8 million barrels according to the Energy Information Administration, net domestic production for the year is still on-par with 2018,” according to Direxion.

A material retrenchment in oil prices or new geopolitical controversy could send RUSL bulls scampering into the downtrodden RUSS.

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