After 18 long years of negotiations, Russia has finally joined the World Trade organisation (WTO), marking a major stride forward in the nation’s continued effort to grow its presence in international affairs and on the global economic stage. Russia is now the 156th member of the WTO and many might find it surprising it is also the last G-20 member to join the global free-trade group. This noteworthy development comes at a time when neighbouring eurozone member nations are plagued with debt, while growth prospects at home remain clouded with uncertainty, thus presenting a lucrative opportunity for those with a stomach for risk and a long-term investment horizon [see also Euro Free Europe ETFdb Portfolio].
Despite belonging to the BRIC, Russia has been flying under investors’ radars for months now as looming European debt drama has chipped away at investors’ confidence when it comes to dipping their toes in the region; given its geographic proximity and tangential exposure to the currency bloc, uncertainties over Russia’s economic outlook have likely been exaggerated.
The nation’s ascension into the WTO has undoubtedly brought back the spotlight onto this often overlooked emerging market. European Union Trade Commissioner Karel De Gucht commented on the newly added WTO member stating, “It will facilitate investment and trade, help to accelerate the modernization of the Russian economy and offer plenty of business opportunities for both Russian and European companies” [see also 25 Ways To Invest In Natural Gas].
Rogers Looks To Russia
According to the Wold Bank, Russia’s entry into the WTO will add about $162 billion each year to economic output in the long run by improving market access. Although the nation is still faced with rampant corruption and numerous inefficiencies relative to developed market standards, this recent stride towards trade liberalization, coupled with President Putin’s commitment to opening up the gates to foreign investors, has inspired legendary investor Jim Rogers to change his tune [see also Commodity Guru ETFdb Portfolio].
Wall Street veteran Jim Rogers, perhaps best known for his success in the commodity market, has long been a sceptic of Russia since the breakup of the Soviet Union. However, Rogers recently made an appearance on CNBC stating, “I’m starting, to my own astonishment, to question my own views on Russia and looking more favourably on Russia. I am not an investor there yet, but I am starting to consider it for the first time in my life.” As one of the world’s largest energy exporters, this economy boasts tremendous potential especially now that Russian companies will have an opportunity to attract more capital and compete more fervently in the global market. Its recent acceptance into the WTO and Putin’s vow to deliver annual economic growth of 6% undoubtedly puts Russia on the radar screen for many now, including investment guru Jim Rogers himself.
Ways To Play
Bullish investors with a stomach for risk have several options when it comes to tapping into Russia’s lucrative equity market:
- Van Eck Market Vectors Russia ETF (RSX): This is by far the biggest and most popular ETF which delivers exposure to Russia. RSX is a favourite among day-traders and long-term investors alike, boasting nearly $1.8 billion in assets under management along with an average daily trading volume topping four million shares.
- Van Eck Market Vectors Russia Small-Cap ETF (RSXJ): This is the small cap counterpart to RSX, offering more of a “pure play” on the local economy.
- iShares MSCI Russia Capped Index Fund (ERUS): This fund has accumulated $153 million in assets under management since launching in late 2010; similar to the other ETFs on this list, ERUS is dominated by giant and large-cap securities from the energy sector.
- SPDR S&P Russia ETF (RBL): Cost-conscious investors will have a hard time passing up this ETF, as it offers by far the cheapest exposure to Russian markets, charging 0.59% in annual expense fees.
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Disclosure: No positions at time of writing.
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