Investors have been pulling out of Russian assets, as latest events spell trouble for such equities. Stocks witnessed their biggest drop in four years after the United States imposed sanctions on Russian billionaires in connection to meddling in the 2016 elections. Moreover, the recent chemical attack in Syria has increased tensions pertaining to U.S.-Russia relations.
Sanctions on Kremlin-Connected Billionaires
The latest sanctions against Kremlin impact seven oligarchs, 12 companies they own or control, and 17 senior Russian government officials. Officials in Washington slammed Russian activities and defended the sanctions by accusing Russian individuals or organizations of benefiting from Russia’s “malign activities,, ranging from the U.S. 2016 election meddling and selling weapons to Syria.
Kremlin representatives have gone to the extent of calling these sanctions outrageous and illegal. They stated that they are doing everything possible to minimize the negative consequences of the sanctions on Russia’s economy.
Russian officials were left shattered as the sanctions had a far reaching effect, which led to Moscow’s blue-chip MOEX index declining 8.3% and the Rubble decreasing more than 4%. This decline was the biggest fall since 2014, when the markets took a hit due to Russia’s invasion of Crimea.
“We haven’t seen such a united, mass retreat from Russian assets for a long time,” per a
Bloomberg article citing Kirill Tremasov, director of the analysis department at Loko-Invest. Syria Attack
Following the nerve agent attack on ex-Russian spy in the U.K., Trump has called for stricter sanctions on Russia, in light of the latest chemical attack on Syria. Multiple medical professionals and activist groups have reported details of a chemical attack.
"Seventy people suffocated to death and hundreds are still suffocating," per a
BBC article citing Raed al-Saleh, head of the Volunteer rescue force White Helmets. A barrel bomb containing toxic agent Sarin dropped from a helicopter has been blamed for the attack in Douma.
“Many dead, including women and children, in mindless CHEMICAL attack in Syria. Area of atrocity is in lockdown and encircled by Syrian Army, making it completely inaccessible to outside world. President Putin, Russia and Iran are responsible for backing Animal Assad,” Trump tweeted.
Syrian government officials and Russia have denied any involvement in the attack and have stated a possible staging of a chemical attack. "The goal of these false conjectures, which are without basis, are designed to shield the terrorists and the implacable radical opposition, who reject a political settlement," per a statement released by Russia’s foreign ministry.
Let us now discuss a few ETFs focused on providing exposure to Russian equities.
VanEck Vectors Russia ETF ( RSX Quick Quote RSX - Free Report)
RSX offers exposure to large- and mid -cap Russian equities. Investors looking to gain exposure in this emerging market nation in spite of the volatility might consider this fund.
This fund has AUM of $1.6 billion and charges a fee of 65 basis points a year. The fund is heavy on Energy (41.4%), Basic Materials (16.9%) and Financials (14.3%). The fund’s top holdings include Gazprom Pjsc, Lukoil Pjsc and Tatneft Pjsc, with 8.4%, 7.4% and 7.1% exposure, respectively. The fund has lost 5.9% year to date but has gained 1.1% in a year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
iShares MSCI Russia Capped ETF ERUS
This fund offers exposure to large- and mid-cap Russian equities. It enables investors to gain from the tremendous potential of this BRICS nation if they are willing to face the risks that come with it.
This fund has AUM of $622.5 million and charges a fee of 62 basis points a year. The fund is heavy on Energy (42.9%), Financials (26.4%) and Materials (18.9%). The fund’s top holdings are Lukoil Pjsc, Sberbank of Russia Ojsc and Gazprom Pjsc, with 12.1%, 11.0% and 10.3% exposure, respectively. The fund has lost 6.6% year to date but has gained 1.9% in a year. It has a Zacks ETF Rank #3 with a High risk outlook.
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