If one country has stood out in 2014, it has to be Russia.
Crippled by sanctions from the US and Europe following tensions with neighbouring Ukraine and negatively impacted by falling oil revenues, the local stock market has struggled.
But amid the chaos, there may be an opportunity.
The iShares MSCI Russia Capped Exchange Traded Fund (ETF) is down 33% for year to date. The ETF, which seeks to track the investment results of an index composed of Russian equities, is tradable through the Standard Bank WebTrader platform and may offer investors with a higher risk appetite the opportunity to participate in an economic recovery.
The top five constituents are oil and gas plays Gazprom and Lukoil, Sberbank of Russia, consumer staples group PJSC Magnit and resource group Norilsk Nickel.
The ETF makes two distributions per year and offers a distribution yield of 0.76%. The ETF trades on a price to earnings multiple of around 10 times historical earnings.
While this may appear to be relatively cheap, investors should remember that this is an historical figure and the impact of sanctions may only come through in 2015. This could significantly impact the valuations for the ETF.
The major risk and opportunity for the ETF is that it has a 47% weighting toward the energy sector and will be heavily impacted by things like the oil price. Should oil continue to struggle in 2015, then investors tracking this ETF will struggle.
Should the tensions between Russia and the West ease, then investors could definitely see some upside.
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