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Oil in Bear Market: 4 Country ETFs to Shun

Oil outburst is back again with the liquid commodity slipping into the bearish territory. It plunged to a 10-month low on June 21, 2017 hurt by surging U.S. supplies outdoing the ongoing OPEC output cut deal. Also, lower Chinese refineryactivity led to this catastrophe.

Oil dropped more than 20% from its recent high, indicating a bear market and marking “the biggest first half slide for Brent since 1997.” United States Brent Oil BNO lost about 22.2% in the last six months while United States Oil USO) was down about 24% (read: 5 ETFs to Buy as Crude Crashes on Inventory Built).

Apart from energy-related investments, there are other corners that are linked to the commodity oil and are equally at risk if black gold remains stressed.

Those corners are key oil producing and exporting countries which have been exhibiting a downtrend, as revenues earned from this commodity account for a major share of their GDP.  We have seen this trend in a number of countries so far this year (read: 5 Country ETFs to Sell).

VanEck Vectors Russia ETF RSX

Oil – seemingly the main commodity of Russia – posed huge risks to the nation. About half of Russia’s exports in terms of value come from oil and natural gas as the country has the third-largestoil reserve in the world and the biggest natural gas reserve. This makes it clear why Russia’s economy is highly dependent on the oil price movement.

The plunge in oil prices forced investors to think twice before investing in Russia. In fact, subdued oil prices and a stronger U.S. dollar on the Fed policy tightening may put pressure on the Russian currency ruble.

RSX is the most popular and liquid option in the space with an asset base of $2.06 billion. The energy sector accounts for about 38% of RSX, which charges 65 basis points as expenses. The fund lost about 13.1% in the last three months (as of January 21, 2017).

Global X MSCI Norway ETF NORW

Norway is among the top 10 nations famous for oil exports and with its comparatively low population, oil forms the key part of the country’s GDP. As per U.S. Energy Information Administration (EIA), Norway is the largest oil producer and exporter in Western Europe.

The most popular way to play the country is with NORW. The product tracks the MSCI Norway IMI 25/50 Index, a benchmark of 54 companies that focus on Norway, charging investors 50 basis points a year in fees (read Nordic ETF Investing 101).

The ETF is heavily concentrated on energy stocks, as these make up for nearly 30% of the portfolio. In fact, Norwegian oil giant Statoil accounts for about 15% of the portfolio alone, suggesting a heavy concentration. Thanks to a slump in oil prices, NORW lost about 1.6% in the last three months (as of June 21, 2017).

iShares MSCI Canada ETF EWC
Canada is also among the world’s top 10 oil producers. The oil, gas and mining sector make up about over a quarter of the Canada’s economy. The country is one of the world's largest producers of dry natural gas (read: ETF Winners and Losers on Trump's Canadian Timber Tariff).

The best way to invest in Canada is EWC, a product that has nearly $2.98 billion in assets. The fund holds just under 100 stocks in its basket. Energy makes up a huge chunk of assets accounting for one-fifth of the total. The fund lost about 1.9% in the last three months (as of June 21, 2017).

Global X MSCI Colombia ETF GXG

Colombia's economy is also energy-dependent and can also be hit hard by the slump in global oil prices. Oil exports make up about 20% of government revenue. Due to energy issues, the economy expanded 1.1% in Q1, below the central bank's estimate of 1.3%. Inflation in the country is still subdued. All these make Colombia an unimpressive investment (read: Will EM ETF Rally Hit the Brake to Start Q3?).

The Colombia ETF GXG is heavy on Financials (47.1%) while the energy sector has about 10.6% exposure. Though the fund gained 2.5% in the last three months, it retreated about 2.4% on June 21.

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US-OIL FUND LP (USO): ETF Research Reports
US BRENT OIL FD (BNO): ETF Research Reports
GLBL-X/F COL 20 (GXG): ETF Research Reports
VANECK-RUSSIA (RSX): ETF Research Reports
ISHARS-CANADA (EWC): ETF Research Reports
GLBL-X NORWAY (NORW): ETF Research Reports
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