ETF investors are piling out of Russian-focused exchange traded funds amid allegations from Vladimir Putin that the US is meddling with its upcoming presidential election.
Global investors have redeemed a cumulative $131 million from Russian ETFs in the past month alone while returns are plus 3% over the same period.
Since 1 January, both inflows and returns have been positive for investors, at $256 million and over 9% respectively.
The turnaround comes after a negative year in 2017 – last December investors were faced with minus 3% returns and outflows of more than $450 million.
The MICEX Index, measuring the largest stocks in Russia, is up around 9% year to date in local currency terms.
Putin will be back
Current President Vladimir Putin is expected to win the election on 18 March, despite allegations of killing off and jailing opponents, crushing anti-corruption marches and meddling in the US presidential elections in 2016. Putin has denied all allegations and has instead accused the US of similar tactics. His victory next month means stability, however, in terms of capital markets.
Optimists are hoping that the 2018-2024 Economic Strategy, proposed by finance minister Alexei Kudrin, will bring about wholesale reforms.
The oil-exporting country was severely hit when the oil price tanked from around $90 in 2014 to $36 in 2016, but it has since rebounded to around $60. Analysts expect the price to stay within a stable range for the near future.
Russian economic risks remain
Russia has been targeted by another more economic sanctions, following the US authorities indicting 13 Russian citizens and three organisations for interfering in the US election.
Many banks were bailed out by the Kremlin in 2017, despite economic growth. Natalia Orlova, Chief Economist and Head of Macro Insights at Alfa Bank, told Global Risk Insights that the collapse of two large banks last year “[…] confirm the view that the economic recovery is, firstly, related to one-off factors, and secondly, very unequally spread across segments and regions.”