With its explosive 700% growth between 2001 and 2006, Russia has become a premier emerging market and member of the so-called BRIC nations. The country's massive crude oil reserves and recent free market initiatives have made it a popular destination for many investors. Stocks in Russia are traded on the Russian Trading System (RTS), which was established in 1995 as Russia's first regulated stock market. Since then, the exchange has expanded to include a full range of financial instruments ranging from cash equities to commodity futures.
The RTS stock exchange markets are open from 10:00 until 11:50 Moscow time (GMT+3) and securities are traded in Russian Rubles.
How to Buy Russian Stocks
The easiest way to gain exposure to the Russian stock market is by purchasing U.S.-traded mutual funds, exchange-traded funds (ETFs) or American Depository Receipts (ADRs). Since these are traded on U.S. exchanges, investors can avoid the complexities and risks associated with investing directly.
Some popular Russian ETFs and ADRs include:
- SPDR S&P Russia ETF (NYSE: RBL)
- Market Vector Russia ETF Trust (NYSE: RSX)
- Gazprom OAO (ADR) (Pink Sheets: OGZPY)
For those seeking more direct access, many U.S. brokerages offer direct access to Russia's RTS, but often charge higher commissions for international trades. Meanwhile, those looking for full-service Russian brokerages also have many options, including the country's largest brokerage, FINAM.
How to Analyze Russian Stocks
Investors that choose to invest in Russian ETFs or mutual funds will want to look at the country's economic health before making an investment decision. A wide array of information on this subject, including current events analysis and economic data, can be found on the World Bank's website.
Investors that choose to invest directly in Russia's RTS can analyze stocks using the English version of the RTS website. From there, investors can find a link to the public company's website where annual reports and other important disclosures can typically be found.
Risks Associated with Russian Stocks
While Russia has experienced exceptional economic growth, there are several key risks to investing in the country, including:
- Less Volatility and Transparency - The U.S. stock market is widely considered to be a safe-haven for investors, so most foreign markets tend to be both more volatile and less transparent in comparison.
- Exposure to Energy Markets - Since oil and gas makes up about half of Russia's revenues and more than 60% of its exports, most Russian ETFs hold as much as 40% of their assets in the energy sector. As a result, lower energy prices could hurt Russian investments.
- Potential for Social Unrest - While the government has been working hard to implement social reforms, there are still many socioeconomic problems that could cause issues.