Wednesday, May 02, 2007

The First Russian Stock ETF Was Launched In April

I have written numerous posts about the Templeton Russia and Eastern Europe closed-end fund (symbol: TRF). I picked it for my Model Portfolio back in December 2005 because it was, at the time, by far the best investment vehicle for U.S. investors to invest in Russia stocks.

I posted back in March that TRF was performing poorly despite the solid performance of the Russian stock market. This underperformance was due to premium compression of TRF's share price relative to its underlying Net Asset Value ("NAV"), which plummeted from a premium of 38.07% at the start of 2007 to a mere 2.73% as of May 2, 2007.

The reason for this premium compression was perplexing and I could not determine a suitable explanation for it. Today, however, I finally found the cause of the compression - the first Russian stock market Exchange Traded Fund ("ETF") was announced earlier in the year. The Market Vectors Russia ETF (symbol: RSX) began trading on Monday, April 30, 2007, on the New York Stock Exchange. (A fact sheet is available at the Van Eck Global website.) TRF finally has a viable competitor in the form of RSX.

RSX tracks the performance of the DAXglobal Russia+ Index, a basket created by the Deutsche Bourse of the 30 most heavily traded Russian companies. Five of the stocks are listed in the U.S. as American depositary receipts (ADRs), 19 trade in London as global depositary Receipts (GDRs) and six trade on Russia's Micex Exchange.

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