Capital outflow from Russia reaches record level since annexation of Crimea
Foreign investors are continuing to withdraw capital from the Russian equity and bond markets due to the tightening of Federal Reserve System (FRS) policy, the European Central Bank scaling down carry trades, and the risk of a global trade war.
Over the week ending June 20, the sell-off rate of Russian securities by non-residents doubled, finanz.ru reports, citing data from EPFR Global (Emerging Portfolio Fund Research).
Cumulatively, foreigners withdrew $520 million, a record amount since March 2014, when Russia’s annexation of Crimea led to the country’s economy being placed under the most severe western sanctions since the end of the 1970s.
Just like the week before, the primary blow was dealt to the equity market, where the non-residents’ weekly sell-off rate doubled, reaching $460 million, a record since the start of 2014. The two-week outflow approached $700 million, and the monthly outflow exceeded $1 billion.
Funds were withdrawn both by funds focused solely on Russia, and by those which include Russia in a package alongside other developing countries. Russia-focused funds pulled out $150 million, doubling the sell-off compared to the previous week.
The largest ETF in the US which includes Russian shares has had to return investors $83.5 million since Friday, June 15. Money flowed out of the fund each day over the course of last week. Since the start of the month, $104 million in clients’ money has left the fund; $500 million since the start of 2018, and more than $1 billion over the last year and a half. As a result, the fund has liquidated all of the investments made in the market over the last three years.
From the iShares MSCI Russia ETF (ERUS), which buys the Russian MSCI index basket, $16.2 million was withdrawn last week, $26.2 million since the start of June, and $229 million since the start of the year. The latest major sales of the ETF took place on June 15 ($6.6 million) and June 19 ($9.5 million), according to statistics from etf.com.