A Russia ETF Backed by a Smart Central Bank

MarketsETF Trends

With so many developed market central banks employing some form of quantitative easing, be it bond buying or negative interest rates, with mixed results, some global market observes believe some central banks lack credibility.

Some might even say the Federal Reserve, with its continuing implications that rates here will rise without a rate hike to this point in 2016, is one of those central banks. In what may come as a surprise to some investors, Russia is home to a central bank that has been widely lauded by global market participants.

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Perhaps that explains why the VanEck Vectors Russia ETF (NYSEArca: RSX) and the iShares MSCI Russia Capped Index Fund (NYSEArca: ERUS) are among the best-performing single-country emerging markets exchange traded funds (ETFs) this year. RSX, the oldest and largest Russia ETF trading in the U.S., is higher by almost 27% year-to-date.

“Since officially taking the reins of the Russian central bank in 2013, Elvira Nabiullina has taken aggressive action, which included hiking interest rates, and allowing the Ruble to float freely, which has in turn held down inflation. According to the central bank, these measures have led to a drop in the inflation rate as of September 12 to 6.6% year-over-year, and they expect that number to keep falling until it reaches their target of 4% by the end of 2017,” reports ETF Daily News.

Russia ETFs have impressed this year particularly when considering market observers widely expect Russia’s worst post-Soviet era recession to extend throughout this year. Onlookers remain cautious over the market outlook.

SEE MORE: Examining Russia ETFs

Gains for Russian stocks have been arriving against the backdrop of a weaker ruble and the currency now looks inexpensive against developed and emerging peers. Earlier this month, Russia’s central bank lowered its benchmark lending rate by 50 basis points to 10%. It is expected Russia will hold off on more rate cuts until next year.

“The aggressive actions by the central bank have created stability in the equity markets — and foreign investors have entered in droves,” according to ETF Daily News.

For more information on the energy markets, visit our oil category.

VanEck Vectors Russia ETF

This article was provided by our partners at ETFTrends.