Russian ETFs retreat as troops advance

As crisis looms on the Russian-Ukrainian border, Russian equity investors dumped their shares on fears of being caught in a long-lasting crossfire. MOEX, Russia's benchmark index has fallen by -11.4% this year to reach a 1-year low. Among the index's top losers this year are Ozon (e-commerce, -40%), VK Company DRC (social media, -33%), Yandex (Internet, -25%), Globaltrans Investment PLC (freight logistics, -20%), and Sberbank Rossii PAO (Banking, -20%).

Political and military tension heightened after Russian President Putin has amassed some 100,000 troops within reach of Ukraine’s border, albeit denying Russia's intentions to invade. On the opposite camp, Washington put 8,500 troops Monday on high alert for possible deployment to Eastern Europe, potentially at very short notice, and other NATO member states moved to boost their security presence in the region.

Alarms have blinked for Russian ETFs investors amid the geopolitical uncertainty regarding military action in Ukraine and prospects of sanctions from western states. Despite some positive movements over the last couple of days, Russian ETFs have sunk in the red zone on a year-to-date basis — posting on average double-digit percentage declines, including VanEck Russia ETF (RSX, -15.83%), iShares MSCI Russia ETF (ERUS, -15.38%), Lyxor MSCI Russia UCITS ETF (LRUS, -15.57%), Franklin FTSE Russia ETF (FLRU, -15.38%) and iShares MSCI Russia ADR/GDR UCITS ETF (CSRU, -15.57%) to mention a few. On the other hand, iShares MSCI Eastern Europe Capped UCITS ETF (IEER), which has a smaller but significant exposure to Russia (66%) dropped by -11.37%.

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