What’s Behind The Strength In Russia ETFs
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russiaIt has been a brutal stretch for many of the world’s top emerging markets in 2013, as several have struggled to keep their stock prices afloat in year-to-date terms. Top markets like Brazil and India have slumped under the weight of their currencies, while less popular—but still huge—markets like Indonesia and Turkey are facing issues of their own.

While China has begun to turn it around lately, and other emerging markets have come on strong in recent sessions, the real stalwart in the developing world has undoubtedly been Russia. The country has managed to break the trend in the emerging market space, and hasn’t plunged like many of its counterparts, suggesting it has been a much less volatile pick in the segment (see all the broad Emerging Market ETFs here).

Inside Russia’s Strength

The main reason for Russia’s strong performance as of late is oil. The country is by some measures the top producer of crude oil in the world, and with recent tensions and an improving developed world economy, oil demand has been relatively high. This has kept the price of crude above $100/bbl. as of late, and with current trends, many are looking for this price to hold in the near term as well.

Furthermore, Russia actually has a current accounts surplus and doesn’t have many issues from a fiscal perspective. This is in stark contrast to many other emerging markets—specifically India, Brazil and Indonesia—which have fallen by the wayside thanks to currency weakness and concerns over balance sheets.

“Everyone is asking what emerging market countries are most vulnerable, and it is mainly those with large current account deficits and large pools of foreign debt,” said Marcus Svedberg, chief economist at East Capital in a FT article. “On both those counts, Russia looks quite healthy”.

How to Play

Given this situation, investors may want to consider a closer look at Russia investments. The ruble looks to maintain more of its strength than other emerging markets, while a firm oil price will undoubtedly help the Russian economy as well.

For investors seeking to tap into this trend, there just a few Russian-based companies that trade on American exchanges that are available choices. Instead, an ETF approach could be the way to go, as these could give investors broader exposure to more companies in the nation that are pretty much impossible to invest in by the average investor right now.

Below, we highlight a few such Russian ETFs which investors may want to consider if they believe these positive relative trends can continue for this huge emerging market:

Market Vectors Russia ETF (RSX)

Easily the most popular Russia ETF, this product trades over four million shares a day, and has assets under management of over $1 billion. The ETF follows the Market Vectors Russia Index, holding about 50 stocks in its basket.

Top holdings include Gazprom (9%), Sberbank (7%), and then NovaTek and Lukoil to round out the group. In total, energy makes up 44% of the portfolio, followed by 14% for materials, and then 13% for telecoms.

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Related posts:

  1. Should Investors Avoid Russia ETFs?
  2. Unsteady Russian Economy Puts Russia ETFs In Focus
  3. Why Russia ETFs Are Headed For More Weakness
  4. Russia: A Dirt-Cheap Profit Opportunity
  5. Five Silver ETFs Surging On Commodity Strength

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