The Russian stock market ended the first working week with a fall

After the strongest sell-off since the spring of 2020 on Thursday, January 13, the Russian stock market continued to decline the next day, January 14. The Moscow Exchange Index fell by 3.5% during the day, its dollar counterpart RTS – by almost 5%. As a result of the main trades, the indices slightly corrected and ended the week with a fall of 2%.

The dollar reached almost 77 rubles during the day, the euro traded above 88 rubles. By 19:30 Moscow time, the American currency is worth 76.3 rubles, the euro fell to 87.2 rubles.

The biggest losers were technology companies and banks. VK receipts fell during the day by 12% (by the evening trading session, the fall was 10.7%), Yandex securities – by 9.8% (5.6%), Ozon – by 8.33% (6.8 %). The securities of Sberbank decreased by 8.3% (6.6%), the parent company “Tinkoff Bank” TCS Group – by 8% (6.1%).

Restless and on world platforms. The Dow Jones industrial index fell 0.65%, the S&P 500 fell 0.36%, the NASDAQ technology index fell 0.03, the German DAX and Euro Stoxx 50 fell 1%, the French CAC fell 0.8%.

The Moscow Exchange index reached a 10-month low during the day before regaining some losses in the late afternoon due to the emergence of demand for the papers of Gazprom, Yandex and Norilsk Nickel, says Mikhail Shulgin, head of global research at Otkritie Investments.

The reasons for the market fall are the same as on January 13: the failure of Russia’s negotiations with NATO and the United States, which took place on January 10, 12 and 13. Russia’s position is as follows: non-expansion of NATO to the east (in particular, the rejection of the idea of ​​ever accepting Georgia and Ukraine into the alliance), the return of the bloc’s armed forces to the positions of 1997, when the fundamental Russia-NATO act was signed, and the non-deployment of strike troops near Russian borders. weapons.

The negotiations ended not so much without a breakthrough, which no one particularly expected, but with the risk of mutual escalation and a potential escalation of tension, Shulgin notes. The market was apprehensive about the comments of Presidential Press Secretary Dmitry Peskov, who noted that the sanctions against the Russian leadership proposed by the US senators the day before could be equated with an initiative to break off relations. At the same time, Deputy Foreign Minister Sergei Ryabkov said that Washington’s rejection of key security requirements (refusal to promise that Ukraine will not be a member of NATO) led the negotiations to a dead end.

This forces investors to bet that there will be plenty of reasons to impose tough new sanctions on Russia, so restrictions will be applied sooner or later, Shulgin says. These fears resulted in a sell-off on the Russian stock and debt markets, and put pressure on the ruble.

Commodity papers fall less (Gazprom – by 1.6%, Rosneft – by 0.59%, Lukoil – by 0.87%), as the oil and gas industry is in more favorable conditions amid the devaluation of the ruble, explains Aton Senior Analyst Mikhail Ganelin: Investors are in no hurry to get rid of Gazprom’s securities due to high gas prices, but they are willing to sell shares of Sberbank, which is so popular with foreign investors. The reason is rather not in the reality of the sanctions – investors do not want to wait for specific facts, they want to eliminate any risks, Ganelin concluded.

Papers of the IT sector are falling not only on geopolitics, but also against the backdrop of a global correction in the IT sector, says Kirill Komarov, head of the investment analytics department at Tinkoff Investments.

In addition to sanctions, investors’ behavior on Friday was determined by rising oil prices, as well as a long weekend in the United States, since Monday is Martin Luther King Day, Shulgin said. At the start of a new trading week, the sale on the Russian market may take a break just because of the low activity of Western (mainly) investors, but in general, selling pressure may continue next week, the expert believes. Companies in the oil and gas sector can help stabilize the market against the backdrop of a rally in oil prices. The reaction of the market is overly emotional at this stage, given the lack of any specifics in the information field, Ganelin believes: on Monday, if there is no new news and comments from both sides, stabilization and a rebound are possible.

The ruble still has a sufficiently large margin of safety, which will protect it from a strong drawdown, analysts at Raiffeisenbank said in a comment. Fundamentally, the Russian currency continues to receive significant support from the growth of world prices. At the same time, if their dynamics in the oil and gas sector does not play a particularly strong role (the lion’s share of foreign exchange inflows goes with interventions), then in the non-oil and gas sectors, prices remain at highs, and for certain positions (for example, nickel, aluminum, etc.) continue to grow, they say in the review. In extreme cases, the Central Bank has the opportunity to suspend purchases of foreign currency on the open market – given that their volume is now near multi-year highs (about $8 billion per month), this could significantly offset the speculative outflow. Finally, the bank’s analysts summarize, one should not forget about the factor of tightening the Central Bank’s policy – the regulator has not been set up for softness before, and the current situation may even serve as a trigger for a stronger increase in the key rate.

As for OFZ, judging by the dynamics on January 13 and 14 (the segment of old securities with fixed coupons lost 2% in price, “sanctioned” securities – 3%), there is an exit of non-residents from securities due to the risk of sanctions against secondary public debt, says analyst FG “Finam” Alexei Kovalev. Even if this applies only to new debt, the activity of non-residents in the old issues will also, apparently, be limited.

But even now, the one-year OFZ yield has reached 9.4%. That is, the market has already set the key rate increase by 1 percentage point (up to 9.5%) from the current level. This is a certain limiter for further growth in yields, Kovalev believes.

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