How Russia's WTO Status Can Boost ETFs

Includes: ERUS, RBL, RSX, RSXJ
by: Tom Lydon

Russia has become a member of the World Trade Organization, after two decades in the making. This move should take some of the uncertainty out of Russian trade and create a favorable case for investing in the country with funds such as the Market Vectors Russia (NYSEARCA:RSX).

"As part of its joining the WTO, Russia will commit to a series of regulations that promise to energize domestic growth and encourage foreign investment, and Russia's accession could also cement the nation's efforts around legislative change and domestic reforms that have improved the business climate and raised Foreign Direct Investment," Van Eck wrote in a recent note.

Foreign business will prosper, with medium-term GDP anticipated to grow by 11%. About 70% of this growth is cited to be from businesses that find lower tariffs and better business conditions in the country of Russia. Those countries that are already in relations with Russia stand to benefit from the latest membership.

However, some corporations and investors are still wary of the WTO membership having as positive impact upon Russia as it did China. Eric Dutram for Zacks reports that many Russian firms are still corrupt and inefficient and unprepared for global competition. As duties are slashed in half over the next few years, those companies may struggle.

Nevertheless, the integration into the WTO will liberalize trade policies and give investors some recourse with Russian trade practices.

"It will facilitate investment and trade, help to accelerate the modernization of the Russian economy and offer plenty of business opportunities For both Russian and European companies," said Karen De Gucht, European Trade Commissioner, in a report.

ETFs that focus on Russia:

  • iShares MSCI Capped Index Fund (NYSEARCA:ERUS)
  • Market Vectors Russia Small-Cap ETF (NYSEARCA:RSXJ)

Market Vectors Russia

Tisha Guerrero contributed to this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.