RSX - 2 Russian ETFs Down More Than 40%

The war on Ukraine by Russia has been escalating over the past few days. This has led to some unprecedented economic sanctions against Russia. Over the weekend, Russian banks were further cut from the international financial system, with reportedly some banks cut off from the SWIFT global payments system. On Saturday, the United States, the European Commission, the United Kingdom, and Canada stated that they would move to prevent Russia from using its $630 billion foreign reserves.

The Russian central bank raised its key policy rate from 9.5% to 20%, its highest this century, to protect the economy from the West’s sanctions. The monetary authority also ordered companies to sell 80% of their foreign currency revenues and temporarily banned brokers from selling foreigner-held securities.

Economists have warned that the Russian economy might shrink by 5%, and today the Moscow stock exchange was shuttered for today. Given this backdrop, these two Russian ETFs, VanEck Vectors Russia ETF (RSX) and iShares MSCI Russia ETF (ERUS), have declined more than 40% this year.

VanEck Vectors Russia ETF (RSX)

RSX conventionally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index that includes securities of Russian companies. As the ETF offers exposure to Russian equities, and the Russian economy is largely dependent on the energy sector, RSX might exhibit significant volatility. The fund can be used by investors seeking to implement a country rotation strategy.

As of February 25, RSX has $1.30 billion in total net assets. The fund’s top holdings include Gazprom PJSC (OGZPY), with 8.33% of net assets, MMC Norilsk Nickel PJSC (NILSY), with 8.25% of net assets, and Tatneft PJSC, with 7.01% of net assets. Over the past year, RSX’s fund flows came in at a negative $96.55 million. The ETF has an expense ratio of 0.61% versus the category average of 0.50%.

RSX’s annual dividend rate of $0.80 yields 2.48% on the prevailing price. It has a NAV of $26.73 and a beta of 1.30. The fund has declined 41.5% year-to-date and 32% over the past five days to close Friday’s trading session at $15.60.

RSX’s POWR Ratings reflect this bleak outlook. The ETF has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

RSX has a Trade and Buy & Hold grade of F and a Peer grade of D. In the 100-ETF Emerging Markets Equities ETFs group, it is ranked #77. Click here to see the POWR Ratings for RSX.

iShares MSCI Russia ETF (ERUS)

ERUS is a non-diversified fund that generally invests at least 80% of its assets in the component securities of the underlying index and in investments that have characteristics similar to those component securities. The fund offers exposure to Russian equities and is tilted heavily toward the energy sector.

As of February 25, the ETF has a NAV of $25.41 and an expense ratio of 0.57% versus the category average of 0.46%. It has $349.44 million net assets of the fund. The fund’s top holdings include Gazprom PJSC (OGZPY), with a 20.09% weight, LUKOIL PJSC (LUKOY), with a 15.18% weight, and Sberbank of Russia PJSC (SBRCY), with an 8.45% weight.

Over the past three years, ERUS’ fund flows came in at a negative $102.61 million. Its annual dividend rate of $1.87 yields 3.72% on current prices. It has a beta of 1.31. The ETF has declined 41.6% year-to-date and 32.6% over the past five days to close Friday’s trading session at $25.00.

ERUS has an overall D rating, which translates to Sell in our POWR Rating system. The ETF has an F grade for Trade and Buy & Hold and a D grade for Peer. It is ranked #79 in the same group. To see the POWR Ratings for ERUS, click here.

RSX shares were trading at $10.86 per share on Monday afternoon, down $4.74 (-30.38%). Year-to-date, RSX has declined -59.26%, versus a -9.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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