Crude Plunge Foments Widest Russia ETF Price Swings in a Year

  • Market Vectors Russia ETF 10-day volatility jumps to 76%
  • About 40% of the fund is invested in oil and gas equities

Will Oil Prices Improve by End of 2016?

Investors in the largest exchange-traded fund tracking Russian equities are enduring the widest price swings in a year as oil, the country’s main export, plunges to less than a third of its five-year average price.

Historical 10-day volatility in the Market Vectors Russia ETF touched 76 percent on Wednesday, data compiled by Bloomberg show. That’s the highest level since February 2015, when it rose to 78 percent.

Price swings in the ETF, more than 40 percent of which is invested in oil and gas companies, have widened as Brent crude sank below $35 a barrel. Energy sales account for about half of Russia’s budget revenue. Historical 120-day correlation between the fund and oil prices rose to 0.79 on Thursday, a record high. A reading of 1 implies the securities are trading in tandem.

“Swings in oil are driving the volatility, and that is driving the Russian market,” Jacob Rappaport, head of Equity Capital Markets at INTL FCStone Financial, a market maker specializing in providing access to international securities including the Market Vectors Russia ETF, said by phone from Florida. “We saw an extreme level of volatility in the Russian market yesterday, and the volatility inspired the extreme level of order flow we had.”

The ETF retreated 0.4 percent to $14.17 at 1:29 p.m. in New York on Thursday, widening its decline this year to 3.3 percent. Brent crude slid 1.1 percent to $34.65 a barrel, pushing its 2016 retreat to 7 percent.

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