Investing in the Canadian and Russian markets may not only be attractive to citizens of those countries. Betting on those regional assets can benefit market participants beyond the borders of each country.
While many investors have a preference for their home country, and tend to buy stocks headquartered in their own country, established and growing stock markets in Canada, Russia can offer respectable returns while adding additional diversity and other locations.
ETFs make international investing relatively accessible, simple and cheap. Below we cover 2 ETFs to diversify into the Candian and Russian markets:
1. iS hare MSCI Canada ETF
Current price: $ 29
52 week range: $ 17.59- $ 30.81
Dividend Yield: 3.12%
Expense Ratio: 0.49% per year, or $ 49 with an investment of $ 10,000
The iShares MSCI Canada ETF (NYSE 🙂 provides exposure to large and medium-sized companies in Canada, a country of approximately 40 million people. Canada is a member of the G7, an informal grouping of seven of the world's advanced economies and & # 39; the world's second largest country by total area.
Energy, mining and machinery are the backbone of exports, accounting for about a third of Canada's gross domestic product (). About 80% of Canada's trade is with the United States.
EWC, which has 85 companies, tracks the MSCI Canada Custom Capped index. The top ten holdings comprise approximately 50% of EOR's net worth, which is approximately $ 2.3 billion. The two largest companies are Shopify (NYSE 🙂 and Royal Bank of Canada (NYSE :).
The top three sectors (by weighting) are Financial (34.67%), Energy (13.69%) and Materials (13.41%), so how the financial and energy sectors perform would affect the overall market.
Since the beginning of the year, the EOR is down about 4% and is flirting at $ 29. However, it is up about 60% since lows in March. The underlying P / E and P / B ratios stand at 12.67 and 1.81 respectively.
In the coming months, the EWC may come under pressure due to potential weakness in the financial sector and volatility in energy prices. Market participants that have benefited from the price increase since early spring may also decide to take some money off the table. New potential investors may view a drop to the USD 27.5 level and below as an opportunity to go long in the EOR.
2. iS hare MSCI Russia ETF
Current price: $ 34.28
52 week range: $ 22.00- $ 45.27
Dividend Yield: 9.86%
Expense Ratio: 0.59% per year, or $ 59 with an investment of $ 10,000
The iShares MSCI Russia ETF (NYSE 🙂 provides exposure to a wide variety of companies based in Russia, a country of approximately 150 million people. It is the largest country in the world in terms of area.
ERUS, which has 24 companies, tracks the index . The ten largest associates make up more than 73% of the net assets of ERUS, which is approximately $ 4,670 million. The three largest companies are Gazprom (OTC :), NK Lukoil (OTC 🙂 and Sberbank Of Russia (OTC 🙂 . The top three sectors (by weight) are Energy (47.53%), Materials (21.98%) and Financial Services (16.81%).
So far in the year, ERUS is down more than 17% and is hovering at $ 35. Yet it is up about 50% since the March lows. The lagging P / E and P / B ratios are 6.52 and 0.89 respectively. The valuation, coupled with the attractive dividend yield, is likely to appeal to contrarian investors willing to take a closer look at the country's stock markets.
According to a recent World Bank report, Russia is heading for an economic recession. The study highlights, "The COVID-19 pandemic has resulted in reduced tax revenues and a weakened ruble." In addition, the euro area and China, Russia's two main trading partners, are also shrinking, which would put pressure on Russia's export-driven economy, led by “ metals '' and agricultural products.
The immediate fundamental outlook and the volatility of oil prices, coupled with possible short-term profit-taking, are likely to cause ERUS to decline in the coming weeks. Seasoned investors would know that the Russian stock market tends to be strongly correlated with the price of oil. So short term investing can feel like a rollercoaster ride and may not be suitable for most retail investors.
However, we believe the country offers long-term growth prospects, in part due to infrastructure improvements, transportation improvements and various government programs that support both entrepreneurship and foreign investment. Hence, those with a two to three year horizon may want to consider buying the dips. Any capital gains would be complemented by generous dividend payments that companies provide to shareholders.
