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Russia Attacks Ukraine: ETF Areas Grabbing Investor Attention
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The tensions between Ukraine-Russia took a major turn after Russian President Vladimir Putin’s announcement to launch a military operation in Ukraine on early Feb 24. In response, Ukraine's President Volodymyr Zelensky has imposed martial law across the country on the same day and asked his people to be patient. Going on, Ukraine's Interior Ministry has informed about the beginning of Russia's invasion. Several reports have highlighted Russia’s troops crossing the border and explosions in various cities, including the capital Kyiv.
Condemning the attack, President Joe Biden has reportedly said that “Russia alone is responsible for the death and destruction this attack will bring, and the United States and its Allies and partners will respond in a united and decisive way,” per a CNBC article.
The news can have more adverse impacts on the markets. Wall Street has already been facing the brunt of the ongoing Russia-Ukraine tensions. All the broad market indices ended in the red again on Feb 23. The Dow Jones Industrial Average index has declined 1.3%, with the S&P 500 and Nasdaq Composite losing around 1.8% and 2.6%, respectively, on the same day.
Considering the ongoing market turbulence, market participants have been making their investment choices and putting money in some ETF areas that have been highlighted below:
ETFs Tracking Russian Equities
Investors are surprisingly increasing their holdings of ETFs focused on Russian equities. The move has been made despite a sell-off in the space. Market analysts are of two opinions on the move. They believe the reason behind the buyout can be to go long on Russian equities currently trading at cheap valuations, according to a Financial Times article. Others are of the opinion that investments in Russian ETFs might be to make gains from the high energy price expectations (per a Financial Times article).
Commenting on it, Todd Rosenbluth, head of ETF and mutual fund research at CFRA, has also mentioned that “The flow to Russian ETFs is either people trying to benefit from the discounted valuation from panic selling or using the ETF to create shares for shorting purposes. Getting liquid access to Russian stocks is harder than it is using ETFs,” as mentioned in a Financial Times article
Going on, the VanEck Russia ETF (RSX) witnessed net inflows of $61.3 millionin the week to Feb 21. Per TrackInsight, iShares MSCI Russia ETF (ERUS) also saw investments of $20.6 million, per a Financial Times article. According to TrackInsight data, ETFs tracking Russian equities saw net inflows of $89.5 million in the week to closing of Feb 21’s U.S. market. The figure is equivalent to 3.1% of the $2.9 billion of assets under management of 15 ETFs listed in the United States, Europe and East Asia (according to a Financial Times article).
Another set of data from FactSet also highlighted a similar trend. Notably, 38 ETFs and mutual funds, with around 50% exposure to Russia and AUM of $8.7 billion, witnessed net inflows of $69.7 million in the week to Feb 17, per the article mentioned above.
Gold ETFs
Another space enjoying investors’ increased attention amid the Russia-Ukraine crisis is the yellow metal. The space has seen inflows of $1.1 billion over the week, resulting in inflows of $4.8 billion so far this year, per a Financial Times article. The figure compares favorably with net outflows of $9 billion seen last year. According to Kenneth Lamont, senior fund analyst for passive strategies at Morningstar, “There are a couple of things playing into the gold story. I think it’s people hedging their risk and also the added bonus that it has historically provided some level of inflation protection,” as stated in a Financial Times article.
Considering the current scenario, gold prices have been rising. The inflationary backdrop in the United States is favorable for gold as the metal is viewed as a hedge against inflation.
Oil prices have been rallying amid the escalating Ukraine-Russia tensions. The West Texas Intermediate futures have increased 4.77% to $96.49 per barrel. Also, the global benchmark Brent has risen 4.72% to $101.41 per barrel, surpassing the $100 level for the first time since 2014.
Investors are closely tracking the energy sector, which is showing strength as global demand and economic growth levels are on the path of recovery from the pandemic lows. According to data from TrackInsight, The Energy Select Sector SPDR Fund (XLE - Free Report) saw about half of the net inflows of around $619 million occurring into energy ETFs in the week to Feb 21 (per a Financial Times article).
Defence Sector ETFs
Defence sector ETFs are also seeing growing popularity as net inflows are almost doubled to $126 million so far this year. In this regard, Peter Sleep, senior portfolio manager at 7 Investment Management, has commented that “You have got the optimists going into Russia and the pessimists buying into defence stocks,” per the same article as mentioned above. The ETFs worth mentioning here are iShares U.S. Aerospace & Defense ETF (ITA - Free Report) , SPDR S&P Aerospace & Defense ETF (XAR - Free Report) and Invesco Aerospace & Defense ETF (PPA) (read: 5 Sector ETFs to Play if Russia-Ukraine Geopolitics Rule).
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Russia Attacks Ukraine: ETF Areas Grabbing Investor Attention
The tensions between Ukraine-Russia took a major turn after Russian President Vladimir Putin’s announcement to launch a military operation in Ukraine on early Feb 24. In response, Ukraine's President Volodymyr Zelensky has imposed martial law across the country on the same day and asked his people to be patient. Going on, Ukraine's Interior Ministry has informed about the beginning of Russia's invasion. Several reports have highlighted Russia’s troops crossing the border and explosions in various cities, including the capital Kyiv.
Condemning the attack, President Joe Biden has reportedly said that “Russia alone is responsible for the death and destruction this attack will bring, and the United States and its Allies and partners will respond in a united and decisive way,” per a CNBC article.
The news can have more adverse impacts on the markets. Wall Street has already been facing the brunt of the ongoing Russia-Ukraine tensions. All the broad market indices ended in the red again on Feb 23. The Dow Jones Industrial Average index has declined 1.3%, with the S&P 500 and Nasdaq Composite losing around 1.8% and 2.6%, respectively, on the same day.
Considering the ongoing market turbulence, market participants have been making their investment choices and putting money in some ETF areas that have been highlighted below:
ETFs Tracking Russian Equities
Investors are surprisingly increasing their holdings of ETFs focused on Russian equities. The move has been made despite a sell-off in the space. Market analysts are of two opinions on the move. They believe the reason behind the buyout can be to go long on Russian equities currently trading at cheap valuations, according to a Financial Times article. Others are of the opinion that investments in Russian ETFs might be to make gains from the high energy price expectations (per a Financial Times article).
Commenting on it, Todd Rosenbluth, head of ETF and mutual fund research at CFRA, has also mentioned that “The flow to Russian ETFs is either people trying to benefit from the discounted valuation from panic selling or using the ETF to create shares for shorting purposes. Getting liquid access to Russian stocks is harder than it is using ETFs,” as mentioned in a Financial Times article
Going on, the VanEck Russia ETF (RSX) witnessed net inflows of $61.3 millionin the week to Feb 21. Per TrackInsight, iShares MSCI Russia ETF (ERUS) also saw investments of $20.6 million, per a Financial Times article. According to TrackInsight data, ETFs tracking Russian equities saw net inflows of $89.5 million in the week to closing of Feb 21’s U.S. market. The figure is equivalent to 3.1% of the $2.9 billion of assets under management of 15 ETFs listed in the United States, Europe and East Asia (according to a Financial Times article).
Another set of data from FactSet also highlighted a similar trend. Notably, 38 ETFs and mutual funds, with around 50% exposure to Russia and AUM of $8.7 billion, witnessed net inflows of $69.7 million in the week to Feb 17, per the article mentioned above.
Gold ETFs
Another space enjoying investors’ increased attention amid the Russia-Ukraine crisis is the yellow metal. The space has seen inflows of $1.1 billion over the week, resulting in inflows of $4.8 billion so far this year, per a Financial Times article. The figure compares favorably with net outflows of $9 billion seen last year. According to Kenneth Lamont, senior fund analyst for passive strategies at Morningstar, “There are a couple of things playing into the gold story. I think it’s people hedging their risk and also the added bonus that it has historically provided some level of inflation protection,” as stated in a Financial Times article.
Considering the current scenario, gold prices have been rising. The inflationary backdrop in the United States is favorable for gold as the metal is viewed as a hedge against inflation.
Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares (GLD - Free Report) , iShares Gold Trust (IAU - Free Report) , SPDR Gold MiniShares Trust (GLDM) and GraniteShares Gold Trust (BAR) are some of the popular ETFs (read: Russia-Ukraine Tensions Escalate: 3 ETFs to Buy).
Oil & Energy ETFs
Oil prices have been rallying amid the escalating Ukraine-Russia tensions. The West Texas Intermediate futures have increased 4.77% to $96.49 per barrel. Also, the global benchmark Brent has risen 4.72% to $101.41 per barrel, surpassing the $100 level for the first time since 2014.
Investors are closely tracking the energy sector, which is showing strength as global demand and economic growth levels are on the path of recovery from the pandemic lows. According to data from TrackInsight, The Energy Select Sector SPDR Fund (XLE - Free Report) saw about half of the net inflows of around $619 million occurring into energy ETFs in the week to Feb 21 (per a Financial Times article).
Defence Sector ETFs
Defence sector ETFs are also seeing growing popularity as net inflows are almost doubled to $126 million so far this year. In this regard, Peter Sleep, senior portfolio manager at 7 Investment Management, has commented that “You have got the optimists going into Russia and the pessimists buying into defence stocks,” per the same article as mentioned above. The ETFs worth mentioning here are iShares U.S. Aerospace & Defense ETF (ITA - Free Report) , SPDR S&P Aerospace & Defense ETF (XAR - Free Report) and Invesco Aerospace & Defense ETF (PPA) (read: 5 Sector ETFs to Play if Russia-Ukraine Geopolitics Rule).