Tag Archives: $DUST

Russia’s ETF Tries to Get Back On The Horse

MarketMuse update courtesy of ETF Trends’ Todd Shriber.

MarketMuse has been profiling the recent market turmoil found all across Europe but mainly Greece and Russia. After a difficult past six months, Russia’s ETF has recently been back on the rise. 

Entering Tuesday, the Market Vectors Russia ETF (NYSEArca: RSX) sported a six-month loss of 35.2%, making it difficult to be bullish on Russian equities.

However, what is now a three-day rally for oil futures is compelling some traders to revisit RSX and the adventurous are even mulling positions in the Direxion Daily Russia Bull 3x Shares (NYSE: RUSL), the triple-leveraged equivalent to RSX. RSX is the oldest, largest and most heavily traded Russia listed in the U.S.

Over the past five days, the United States Brent Oil Fund (NYSEArca: BNO) is up more than 14%, which is important because Russia, the largest non-OPEC producer in the world, prices its oil in Brent terms, the global benchmark. RSX and RUSL have responded with arguably tepid five-day gains of 1.6% and 4.3%, respectively.

Still, traders with temerity might want to give RUSL a look because there are signs of capitulation among RSX bears.

“The RSX, country ETF for Russia, seen below on the daily timeframe, shows a consolidation pattern which has morphed into a sideway channel. Bears have thus far failed to crack it lower, perhaps blinded by love for a crash in crude and failing to recognize the temporary bottoming signs in place for energy and energy stocks. Thus, RUSL is on my radar as a levered long play, especially if RSX holds over $15.30 today,” according to Chessnwine of Market Chess.

Russia ETF

Lunch with Russia ETFs, in particular RUSL, is far from free. RSX has a three-year standard deviation of 27.2%. Said another way, RSX has been 1,200 basis points more volatile than the MSCI Emerging Markets Index over the past three years.

Additionally, oil prices will likely determine the near-term fate of RSX and RUSL. After all, no non-OPEC is as heavily dependent on oil as a driver of government revenue as Russia is. Nearly half of Russia’s government receipts come by way of oil exports.

Of course, there is the valuation argument, a familiar refrain of Russia bulls in recent years. Indeed, Russian stocks are down right cheap. At a forward P/E of four, the MSCI Russia Index trades at less than half valuation of the MSCI Emerging Markets Index and about a quarter of the valuation of the S&P 500.

There is another interesting point in favor of RUSL: Investors’ tendency to be wrong with leveraged ETFs. RUSL has seen outflows of over $21 million over the past month,according to Direxion data.

There is validity in going against the crowd with leveraged ETFs. Consider this: From about Aug. 20, 2014 to Sept. 23, the Direxion Daily Gold Miners Bear 3X Shares (NYSEArca: DUST) lost $185.3 million in assets but surged 55% over that period.