Whatever Happened to...The Russia Small-Cap ETF? (RSX, RSXJ)

Including today, there have been six trading days following the "election" of Vladimir Putin to his third term as Russia's president. Home to some of the worst corruption in the emerging markets universe, and that's saying something, Putin's victory was as expected as a cold day in Siberia in February. Basically, it was a foregone conclusion. Still, the market didn't seem to like the result as the Market Vectors Russia ETF RSX, the oldest and largest Russia-specific ETF, tumbled early last week. RSX is still down 3% in the past six days. The other side of the coin is that this may be a fine buying opportunity to for RSX and its peers as some analysts have said Russia is offering compelling valuations relative to the other emerging markets right now. For those willing to take on a bit more risk, it's worth remembering there's a small-cap ETF devoted to the "R" in BRIC: The Market Vectors Russia Small-Cap ETF RSXJ, which is one month shy of its first birthday. The Market Vectors Russia Small-Cap ETF won't wow traders with average daily volume of less than 4,800 shares and the fund has managed to pull in just $5.4 million in assets under management in 11 months of trading, but those numbers arguably belie the ETF's strong suits. For example, not only has RSXJ outperformed RSX following Putin's victory, the ETF is up more than 13% year-to-date, making it a better performer than small-cap ETFs tracking Canada and South Korea, just to name a couple of markets. The iShares Russell 2000 Index Fund IWM has also lagged RSXJ to start 2012. As is par for the course with Russia ETFs, RSXJ does feature a large combined allocation to the energy and materials sectors. In this case, we're talking about almost 45% of the fund's weight goes to those two groups. That said, a double-digit weight to the consumer discretionary group could prove helpful assuming the Russian economy improves. Also noteworthy is the fact that RSXJ leans a bit towards the conservative as utilities, health care and consumer staples combine for about 20% of the ETF's weight. That's not enough to suck all the beta out of RSXJ, but at the sector level, the fund is positioned more conservatively than its large-cap counterparts. As for RSXJ's technicals, at the moment, the outlook is mediocre. The ETF resides above its 50-day moving average and support looks firm just below $17. The negative side of the coin is that the ETF is also trading below its 20- and 200-day moving averages and likely needs a strong volume push above $19 to draw in new buyers. The bottom line with RSXJ is that the ETF has utility as a play on rising oil prices and if Russian equities show a decent level of outperformance relative to other emerging markets this year, that might prompt global investors to at least nibble at Russian small-caps.