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Russian ETF jumps as some sense bargains in ‘uninvestable’ market -Breaking


© Reuters. Traders look at financial information displayed on screens in the IG Index trading area, London, Britain. February 6, 2018, 8:01 PM. REUTERS/Simon Dawson


By Danilo Masoni

MILAN (Reuters – A Russia-exposed ETF jumped more than 100% in London last Thursday. It is a sign investors believe current distressed levels are a good entry point to Russian assets at a low price, even though the Ukraine crisis continues.

In the aftermath of Western sanctions on Moscow’s invasion of Ukraine, exchange traded funds (ETFs), remain one of few avenues to get exposure to Russia. ETFs continue to trade even though the liquidity in their underlying assets dries up. This makes it difficult for us to calculate the true value.

Moscow’s bourse was closed for the fourth day in succession. Russian bonds and stocks are “inthe realms of utterly iminvestable”, stated Peter Harrison, CEO. Schroders (LON:).

Schroders is like all other asset managers and has an pending order to sell Russian stocks.

BlackRock’s shares of the iShares MSCI Russia/GDR ETF (NYSE) rose by up to 106% on Wednesday, despite investors not touching Russian securities. This tracker tracks depositary receipts from Russian firms such as Gazprom (MCX):.

However, the ETF’s value is down more than 80% for the year. Volatility is expected to continue high up until there is a solution. There are reports that there will be a second round of peace negotiations on Thursday, which could raise hopes.

Jawaid Afsar (Securityquity’s sales representative), said that the bounce is indicative of both bargain hunting as well as potential belief in resolution.

Like many other foreign exchange traded funds, the iShares ETF temporarily suspended new share creation, while Deutsche Boerse and London Stock Exchange (DE:) had frozen trading of several depositary receipts.

Do not touch

Van Eck Russia ETF is U.S. listed. This has led to comparisons with last year’s frenetic buying of meme stock stocks. Analysts believe that the rapid fall has fueled interest, a lot of which was driven by retail investors.

Numerous social trading platforms across Europe have already stopped trading in Russian stocks since this week, just before being suspended by LSE. This angered retail investors who were looking to purchase what they considered bargains.

Social trading broker eToro has frozen buy orders for some Russian stocks this week. It said that it would close certain positions at Friday’s end and will do so for Magnit, a Russian retailer.

eToro had seen interest in Russian stocks increase among its users before the suspension.

However, mainstream investors tend to remain indifferent.

Sebastian Marland from AFS Group, an equity analyst in the Netherlands, stated that no brokerage will trade these names because there’s no upside.

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