Wagers that the Market Vectors Russia exchange-traded fund will decline in New York trading reached a 22-month high after the Micex Index (INDEXCF) fell 7.6 percent in Moscow last week, extending its rout this month to 14 percent. Open interest on put options giving investors the right to sell the ETF reached about 283,000 on March 13, almost double the four-week average and up from a 2014 low of 54,000 in January, data compiled by Bloomberg show.
The U.S. and the European Union are threatening sanctions if Russia doesn’t back down from annexing Crimea, where preliminary results show people voted yesterday to rejoin their former Soviet master two weeks after PresidentVladimir Putin dispatched troops to take control of the region. Stock trading volumes have soared as tensions escalated. Trading on the Moscow Exchange reached a record last week, while 27.5 million of the most-traded Russian shares changed hands each day in New York this month, 2.4 times the norm over the past year.
The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. and the Market Vectors Russia (RSX) ETF, the biggest U.S. exchange-traded fund that holds Russian shares, both sank for a fourth straight week. The Bloomberg Russia gauge declined 5 percent to 78.52 in the five days to March 14 and the Market Vectors fell 5.5 percent to $21.81. The Micex gauge has slumped 21 percent from a January 2013 high.
Global investors poured money in Russian equity funds for a second week as of March 12, injecting $133.2 million and ending 11 weeks of declines, according to EPFR Global data. Inflows rose after Russian forces took Crimea under control, the data show. ETFs accounted “for the bulk of the inflows,” pointing to short interest, Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, said March 14.
A short sale is one in which stock is borrowed and sold, with the hope of profit by repurchasing the shares later at a lower price. Year-to-date, outflows from Russia Equity Funds totaled $702 million, the worst start to a year since EPFR Global began tracking them in 1996, Brandt said by e-mail.
The Moscow Exchange said daily trading volumes in equities rose to a record-high 72 billion rubles ($2 billion) in the first two weeks of March, compared with an average of 35 billion for 2013, data compiled by the exchange show.
American depositary receipts of OAO Gazprom, Russia’s biggest company, dropped 12 percent in New York this month to $6.72 and traded at 2.6 times estimated earnings, the cheapest level among global peers.
Source: BloombergView
