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Turkey shot down a Russian plane on the Syrian border. RSX was sold on the news. Does this enforce the bear thesis? The Market Vectors Russia ETF (NYSE: RSX ) has found itself under pressure when Turkey shot down a Russian jet on the Syrian border. Russia is not expected to take this matter lightly, as one of the two pilots was shot to death from the ground, and one of the marines who took part in the rescue mission also died. However, despite the fact that I have argued for an RSX bear thesis multiple times, I think this tragic incident will have limited consequences for the fund. Russia has multiple economic ties with Turkey, which increased after Russia became subject to sanctions after the developments in Ukraine. Russia exports gas to Turkey, and is also building the latter’s first nuclear plant. Last year, more than 4 million of Russian tourists went to Turkey for their holidays. In turn, Turkey supplies Russia with textile production and, increasingly, with food, including fruits and some meat. I won’t discuss any political ways of the supposed “Russian vengeance”, and will focus on the possible economic consequences of Russia’s actions for RSX. In my view, the only possible way to economically respond to Turkey’s actions without shooting itself in the leg is to ban the sale of vacation tours to Turkey. I see no way how both countries will end their energetic relationships without major damage to both sides. In fact, this touring ban has already come into being. The Russian Federal Agency for Tourism has already recommended that selling tour packages for Turkey be stopped. There is a possibility that the ban will last for a long time, as the Russian government has previously used any available chance to redirect Russian tourists from abroad to Crimea. Crimea lacks the necessary infrastructure and a culture of service following decades of underinvestment and, in my view, is uncompetitive compared to Turkey. Given all the recent problems that have hurt Crimea’s economics, there will be a massive incentive to help the disputed peninsula by redirecting tourists from Turkey to Crimea. This is pure speculation, of course, but I expect this to be implemented in reality. In this case, the damage will be limited to the economy of Turkey, which is beyond the scope of the current article, and the plans of Russian tourists, who have got accustomed to a certain level of service and will have to either decrease their appetites or put more money on the table. As for the fund’s holdings , I see no significant threats. The energy part of RSX could only benefit if increased tensions in the region finally lead to higher oil prices. I don’t think this will be the case, but the possibility of such an outcome certainly exists. Sberbank (OTCPK: OTCPK:SBRCY ) and Yandex (NASDAQ: YNDX ) have a presence in Turkey, but there are no signs that they will be harmed unless there is a very serious exchange of sanctions between the two countries. RSX fell on the news, but I think that it was just emotional overreaction. I remain concerned about the price of oil, the state of the Russian economy and the overvaluation of the Russian ruble, but I do not think this incident is a meaningful contribution to the bear thesis. Scalper1 News
Scalper1 News