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Summary RSX grew by 6.4% in October, after 5 consecutive months of losses. The Bank of Russia expects that the inflation rate should decline by half by late 2016. If the prediction of lower inflation is correct, the Bank of Russia will start to cut the interest rates notably. The October Russian share market optimism may evaporate rather quickly if it won’t be supported by a positive oil price development. After five consecutive months of losses, share price of the Market Vectors Russia ETF (NYSEARCA: RSX ) increased in October. During the first half of the month, RSX grew from $15.7 to $17.75. Although it declined to $16.71 during the second half of October, RSX finished the month up by 6.43%. The growth was fueled by slightly higher commodity prices in early October. Although oil and metals prices started to decline again in late October, the share market was supported by an improved economic outlook. The minister of economic development said that Russian GDP should decline by 3.9% in 2015 but it should grow by 0.7% next year. Russia still has trouble with a high level of inflation that stands at 15.7%. But the Bank of Russia expects that the inflation rate will start to decline steeply by early 2016. If this prediction turns out to be right, the Bank of Russia will keep on cutting the interest rates. These expectations helped to support the Ruble exchange rate as well as the Russian share market. Also the situation in Ukraine is calm, there are no major fights anymore. Some significant changes regarding RSX’s composition occurred in October. Sberbank ( OTCPK:SBRCY ) became the biggest holding when the steep growth of the share price lifted the weight of the biggest Russian bank to 8.16%. Also weights of Gazprom ( OTCPK:OGZPY ) and Lukoil ( OTCPK:LUKOY ) increased. Weight of the biggest Russian food retailer, Magnit, declined from 7.31% at the end of September to 6.59% at the end of October. The Top 15 holdings represent 75.34% of RSX’s portfolio. Source: own processing, using data from vaneck.com Russian shares did very well in October. The biggest winner is Yandex (NASDAQ: YNDX ). Shares of the biggest Russian search engine provider rocketed by 50%, as the Q3 results have beaten expectations, the company has increased its 2015 guidance, and it has become the default search engine for Windows 10 in Russia, Ukraine and Turkey. Shares of the two biggest Russian banks, Sberbank and VTB, grew by 24% and 9% respectively. On the other hand, shares of Magnit lost 4.71% of value, as the food retailer announced a decline of net income by 28% y-o-y. Source: own processing, using data from Bloomberg The chart below shows the 10-day moving correlations between RSX and oil prices represented by the United States Oil ETF (NYSEARCA: USO ) and between RSX and the S&P 500. During the first decade of October, RSX grew along with USO; however, after USO began to decline, it didn’t drag RSX down. Similarly, RSX didn’t react to the jump of oil prices in late October. As a result, the correlation between RSX and USO was relatively low during the second half of the month. The correlation between RSX and the S&P 500 was very high and stable from late August to the middle of October, but it has declined rapidly over the last two weeks. It means that as a result, RSX was moving in its own direction over the last decade of October, without taking into account the oil market or the global financial market developments. Source: own processing, using data from Yahoo Finance The volatility of RSX was relatively high during the first half of October, but it declined significantly in the middle of the month and the end of October was relatively calm. On the other hand, as shown by the chart below, the Russian share market is highly volatile and the volatility eruptions are relatively regular. Source: own processing, using data from Yahoo Finance Some of the more interesting news: Yandex reported better than expected Q3 2015 financial results and increased the 2015 guidance. Yandex also announced that it added an online video streaming service to its film and TV recommendation service. An important news came on October 13, when Yandex announced that its search engine will become the default homepage and search engine for Windows 10 in Russia, Ukraine, Turkey, Belarus, Kazakhstan and several other countries in the region. This strategic partnership may help Yandex in its fight with Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ), over market share in Russia. Norilsk Nickel ( OTCPK:NILSY ) announced that since the start of its buyback program, it purchased 1,186,534 ordinary shares for a total amount of approximately $186 million. The company has also announced a successful placement of $1 billion in eurobonds . The 7-year bonds bear an annual interest rate of 6.625%. Norilsk Nickel has also secured a $1.2 billion credit facility from Sberbank. Via an asset swap , Gazprom strengthened its position in the European gas storage and sales segment. It has also expanded its exploration and production activities in the North Sea. Gazprom also started construction of the Ukhta-Torzhok-2 gas pipeline that will feed natural gas to Nord Stream 2. Polyus Gold announced that the Independent Committee of the Board reiterated its opinion that the takeover offer of $2.97 per share offered by Sacturino Limited is too low. Lukoil announced that it discovered a large gas field in the Romanian deep sea offshore. Drilling intersected a 46-meter thick productive interval. The seismic data indicates that the area of the gas field can reach up to 39km 2 and it may contain 30 billion m 3 of natural gas. The voices against the anti-Russian sanctions keep on growing. The President of the European Commission, Jeaun-Claude Juncker declared that Europe must improve its relationship with Russia: We must make efforts towards a practical relationship with Russia. Russia must be treated decently. We can’t let our relationship with Russia be dictated by Washington. Conclusion Some positive macroeconomic news, the stabilized RUB/USD exchange rate and little higher oil prices supported RSX in October. Also the political situation keeps on improving as the situation in Ukraine is calm and some of the EU representatives indicate that the anti-Russian sanctions may end soon. But also stronger oil prices are important for further growth of RSX’s share price. If the oil price keeps on improving, November may be positive for RSX as well. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.