The two main Russian stock ETFs in the U.S. are the VanEck Russia ETF and the iShares MSCI Russia Capped ETF.
The Moscow stock market was closed for trading Monday in light of the financial turmoil caused by the conflict in Ukraine.
That has turned the two main Russian-stock ETFs traded in the U.S. into a de facto Russian stock market.
The two exchange-traded funds are the VanEck Russia ETF RSX, with assets of $1.3 billion, and the iShares MSCI Russia Capped ETF ERUS, with assets of $349 million.
The Van Eck fund is based on the MVIS Russia Index, and the iShares fund on the MSCI Russia 25/50 Index.
The Van Eck fund has plunged 29% Monday and 57% since Feb. 16, and the iShares fund has cratered 28% Monday and 56% since Feb. 16.
TIMOTHY A. CLARY/AFP via Getty Images
With the stocks underlying the ETFs currently not trading, the ETFs provide the best estimation of the stocks’ values. And obviously, the war is pushing those values and the ETFs down hard.
This demonstrates the power of ETFs.
“The ETF has proven itself time and time again, especially around geopolitical events when liquidity is difficult to access,” Athanasios Psarofagis, a Bloomberg Intelligence ETF analyst, told Bloomberg.
“ETFs are supposed to be index trackers, but when that process breaks down, they take on the role of price-discovery vehicles — and it’s impressive how accurate they have been.”
This isn’t the first time ETFs have substituted for closed markets. It happened with bond ETFs at the beginning of the pandemic in March 2020, when the market for bonds itself froze, Bloomberg noted.
It also happened when the Greek stock market was closed for five weeks in 2015, but Greek stock ETFS continued to trade in the U.S., CNBC pointed out..
