How to Invest in Russia – Stocks, ETFs & the Russian Ruble

July 29, 2021 22:04 UTC
Reading time: 17 minutes

After Russia’s sharpest contraction in 11 years, many analysts are now forecasting this year to be the beginning of a sharp rebound in its economy thanks to higher energy prices and a bounce in consumer demand.  

This has led to a series of upgrades in the outlook of Russia’s economy from analysts all over the world. It's also one reason investors are keen to learn how to invest in Russia as well as the pros and cons of doing so.  

In this ‘How to Invest in Russia’ guide, we go through how to gain exposure to the potential growth in the economy through exchanged traded funds (ETFs), how to invest in the Russian Ruble and how the central bank is influencing the currency and much, much more! 

Why invest in Russia? 

From 2018 to 2020 foreign direct investment (FDI) was rapidly increasing in the country. However, due to the COVID-19 pandemic, FDI flows fell by 96% from $32 billion in 2019 to just $1.1 billion in 2020. While FDI is a small part of Russia’s gross domestic product (GDP) it does highlight the positive economic outlook toward the country before the pandemic.  

Twelve months after the pandemic this outlook is now starting to emerge once more. After the economy shrank 3% in 2020, analysts are forecasting a 2021 GDP growth of 3.8%. This has been revised higher from 2.9% as the economic recovery picks up.  

One reason investors are so keen to learn how to invest in Russia is due to the country’s large number of natural resources. According to the EIA (Energy Information Administration) in the US, Russia was one of the world’s largest producers of crude oil and the second largest producer of natural gas.  

As economies started to reopen after the pandemic, commodity prices surged higher helping to lift Russia’s economic prospects. In fact, investment banks such as JP Morgan have called for a commodity supercycle to develop over the next decade further highlighting the increase in interest in investing in Russia. 

How to Invest in Russia using Stocks & ETFs 

There are a variety of ways to invest in Russia. Some of the most common methods include investing in Russian stocks and ETFs (exchange traded funds). With Admirals, you can invest in a variety of different Russian companies that are listed on exchanges in the United States, the UK and elsewhere. 

This includes companies such as Gazprom, Lukoil and Yandex NV. In fact, Gazprom PJSC is the largest publicly listed natural gas company in the world by revenue, even though it is largely state-owned. The image below is a chart of Gazprom PJSC’s share price since 1996 which is available to invest via the Admirals Invest.MT5 account.  

Source: Admirals MetaTrader 5, OGZD, Monthly - Data range: from Jan 1, 2004, to Jul 29, 2021, performed on Jul 29, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

One of the challenges with investing in Russian stocks is the time it takes to research all of the different companies. As most of the biggest companies would be in the natural resources sector further analysis would need to be done on the fundamental outlook of the sector.  

This is why more and more investors are researching the best Russian ETFs, rather than the best Russian stocks to invest in.  

  • What is an ETF? An exchange traded fund is an investment product based on the concept of pooled investing. Essentially, an ETF is a fund that aims to track the performance of a specific index, commodity, geographical region, etc.  

For example, with Admirals, you can trade on the iShares MSCI Russia ETF CFD (contracts for difference). CFDs allow you to speculate on the price direction of a financial instrument. As you are trading a derivative of the underlying market price you can trade long and short, potentially profiting from rising and falling markets.  

But what exactly is the iShares MSCI Russia ETF and why is it a popular method among institutional traders to gain exposure to the prospects of the Russian economy? Let’s take a look! 

Trading the iShares MSCI Russia ETF 

iShares is one of the world’s largest ETF providers, offering more than 800+ exchange traded funds around the world. The funds are managed by one of the world’s biggest asset management companies called BlackRock.  

According to the investment objective of the iShares MSCI Russia ETF, the aim of the fund is ‘to track the investment results of an index composed of Russian equities.’ This enables investors to gain broad exposure to the Russian stock market.  

The image below shows the hypothetical performance of $10,000 invested into the ETF from 9 November 2010 to 28 July 2021, taken directly from the iShares factsheet.  

Source: iShares, 29 July 2021. Past performance is no guarantee of future performance.  

The chart above shows just how volatile the Russian stock market has been before 2015. The Russian financial crisis of 2014 – 2016 was the result of a sharp devaluation of the Russian Ruble. The fall in oil prices in 2014 and economic sanctions imposed on Russia following the country’s annexation of Crimea hurt the economy during these years.  

However, a major turning point in the economy took place around this time from central bank intervention. This eventually led to an increase in economic activity and foreign investment with the Russian stock market growing once again.  

Source: iShares, 29 July 2021 

Investors can either trade the iShares MSCI ETF or use it as a basis to research the biggest Russian companies to invest in. The fund’s factsheet details all of the holdings of the fund including the top 10, as shown above. 

You can also view the price of the fund through the MetaTrader 5 trading platform provided by Admirals. At the time of writing, the weekly price chart of the iShares MSCI Russia ETF CFD is showing an upwards bias. 

Source: Admirals MetaTrader 5, #ERUS, Weekly - Data range: from Jul 8, 2018, to Jul 29, 2021, performed on Jul 29, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

The uptrend is evident as from a technical analysis perspective the price is making higher high and higher low cycle formations. The exponential moving averages (a measure of the trend using the average closing price of a ‘user defined’ number of historical candles) are also moving upwards indicating an uptrend.  

In this instance, the 20-period (blue) exponential moving average, the 50-period (red) exponential moving average and the 100-period (green) exponential moving average are moving higher. If the price can break through the multi-year high of around 45.28 it would indicate a further bullish bias.

How to Invest in Russia using the Russian Ruble 

Another way to gain exposure to the economic prospects of the Russian economy is by trading the Russian Ruble. A currency is often linked to the health of an economy. Generally speaking:  

  • If an economy is doing well foreign investors tend to move capital into the country, thereby increasing the value of the currency.  
  • If an economy is doing poorly, capital tends to move out of the country into a better performing economy thereby causing the currency to decline.  

This was evident during the Russian financial crisis when in January 2017 the Russian Central Bank had interest rates at 10%. From 2015 to 2017, the Russian Ruble rallied higher against the US dollar, as seen from the chart below in-between the two black vertical lines.  

Source: Admirals MetaTrader 5, USDRUB, Weekly - Data range: from Dec 21, 2014, to Jul 29, 2021, performed on Jul 29, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

In the weekly price chart of the US dollar against the Russian Ruble (USDRUB), the highlighted time period shows a significant decline in the exchange rate. With currency pairs, this means the US dollar was weakening while the Russian Ruble was strengthening.  

Perhaps most interestingly to investors, is the fact in the middle of 2021 the Russian central bank increased its interest rate to 6.5% to fight off high inflation. This was the sharpest hike since 2014 and the fourth interest rate rise in 2021. At the same time, the bank also indicated that further interest rate rises were possible. 

The price action in USDRUB during 2021 shows a series of lower highs, as highlighted in the chart below above by the descending black line. While the decline has not been as strong during the 2015 – 2017 period it is certainly a currency pair to watch. 

Source: Admirals MetaTrader 5, USDRUB, Weekly - Data range: from Dec 21, 2014, to Jul 29, 2021, performed on Jul 29, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

In the first half of 2021, the US dollar had been one of the better performing currencies. But, if it becomes overstretched then USDRUB could be on the radar for currency traders given the commitment from the Russian central bank to increase rates to fight off inflation. 

Higher interest rates can help to tame high inflation by making the cost of borrowing more expensive and saving much more attractive. In the case of Russia, it also helps increase foreign demand for its high-yield where investors may focus on Russian bonds to try and achieve a near 10% return on their capital.  

Did you know that with Admirals you can trade currency pairs from a variety of accounts? For example: 

  • The Trade.MT5 and Trade.MT4 account allows you to trade CFDs on forex, stock indices and commodities commission-free with spreads from just 0.5 pips.  
  • The Zero.MT5 and Zero.MT4 account allows you to trade CFDs on forex, stock indices and commodities with a low commission from $1.8 per lot but with access to ECN-style raw spreads starting from 0 pips.  

With the Trade.MT5 account you can also trade CFDs on stocks and ETFs from 15 of the largest stock exchanges in the world from just 0.02 USD per share on US stocks! 

Invest in Russia from MetaTrader 5 

To get started, all you need to do is open a FREE demo trading account or live trading account. Then you will have instant access to the world’s most popular trading platform MetaTrader 5 for desktop, web and mobile.  

Below is a step by step process on how to start investing or trading from the MetaTrader 5 web platform.  

  1. Login to your Admirals account to gain access to the Trader’s Room. This area allows you to manage different trading and investing accounts, access reports and history, deposit and withdraw funds, manage your Admirals Wallet, download exclusive platform upgrades and more.  
  2. Once you are in the Trader’s Room, click on the Trade icon next to your account name to open the MetaTrader 5 web-based trading platform.  
  3. To select the instrument you want to trade, simply right click in the Market Watch window and select Symbols. This window allows you to see of the instruments available to trade on via Admirals.  
  4. After selecting your chosen instrument, or group of instruments click Show to add it to your Market Watch list.  
  5. To view a live price chart, simply drag the instrument name onto the chart. You can add on a variety of different technical trading indicators and adjust the timeframes from this window as well.  
  6. To place a trade, right click on the chart, select Trading and then New Order. You can now enter your entry, stop loss and take profit levels and contract size for risk management. 

Source: Admirals MetaTrader 5 Web, 29 July 2021 

When to Invest in Russia? 

One of the biggest challenges for many beginner traders is knowing when to trade and when not to. This is where technical analysis tools can be of value. Price action patterns and technical trading indicators can help traders to identify potential turning points in the market.  

However, performing technical analysis properly does take skill and time to build up. Fortunately, Admirals provides you with a potential solution in finding actionable trading ideas in thousands of different financial instruments through the Technical Insight Lookup indicator from Trading Central.  

You can access this from the Premium Analytics section in the Trader’s Room.  

Source: Premium Analytics, 29 July 2021 

You can search from thousands of different instruments and the indicator will find the different technical analysis events taking place on that market. These are categorised by short-term, intermediate-term and long-term events.  

Each event also has a technical description and a small chart explaining what the pattern or indicator is depicting. This is a great way to learn more about technical analysis! 

Why Invest with Admirals? 

✔️ Admirals is a well-established company authorised and regulated by the UK Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC) and other well-known financial regulators. 

✔️ Open a Trade.MT5 account and trade CFDs on currencies, commodities, indices and more commission-free with spreads starting from just 0.5 pips! 

✔️ Trade on stock and ETF CFDs from 15 of the largest stock exchanges in the world from just 0.02 USD per share on US stocks! 

✔️ Open an Invest.MT5 account to invest in real stocks and ETFs to build a long-term portfolio and a passive stream of income through dividend investing! 

✔️ Supercharge your trading with state of the art Premium Analytics such as the Technical Insight Lookup indicator which finds actionable trading ideas for you.  

Did you know that you can test ALL of these features by opening a FREE demo trading account? 

Click on the banner below and get started today! ▼▼▼ 

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Jitanchandra Solanki
Jitanchandra Solanki Financial Markets Author, Admirals London

Jitanchandra is a financial markets author with more than 15 years experience trading currencies, indices and US equities. He is an accredited Market Technician with a BA Hons degree.