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Putin’s war makes Russian stocks world’s worst with bleak outlook


(Bloomberg) — Vladimir Putin’s invasion of Ukraine sent Russian stocks plummeting in February. Nearly 10 months later, a recovery seems a long way off after sanctions triggered an exodus of investors and made them among the world’s worst-performing companies.

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While the economy has largely held up better than expected in the face of sanctions imposed by the US and its allies, the stock market paints a different picture.

Russian shares have been dropped from global standards and exchange-traded funds that track the country’s shares have been frozen or closed. Domestic investors have been unable to save the domestic market from the war-induced recession, although most foreigners are still prohibited from selling the domestic stocks they hold.

The February sell-off kept the Moscow market closed for a record long time. Its dollar-denominated RTS index is now down 35% this year, making it the worst-performing benchmark of the 92 indexes tracked by Bloomberg globally in local currency and third-worst by currency. dollars. Russia’s MOEX index, priced in rubles, has plummeted 44%, heading for its steepest annual decline since 2008. With the tensions of war growing, more losses could lie in stock.

“Russian stocks reflect a bleak outlook as Western sanctions begin to weigh on the domestic economy,” said Piotr Matys, senior currency analyst at InTouch Capital Markets Ltd. for Russian oil, especially at a time when the European Union is fully committed to reducing its dependence on Russian goods.”

The EU and G-7 have agreed to ban companies in the bloc from providing vital services including insurance to Russian crude oil tankers if it is purchased above a ceiling price of $60 a barrel. Russia’s oil stockpiles have also been hit by volatile crude prices, with benchmark Brent down about 40% from its March high.

Lukoil PJSC and Gazprom PJSC, the most important members of the MOEX Index, are down 30% and 53% respectively this year. Meanwhile, the largest listed lender, Russia’s Sberbank PJSC, fell 54% as international sanctions affected everything from Russia’s access to foreign exchange reserves to messaging systems. SWIFT banking information.

Fears that Putin could expand the reserve call-up from the 300,000 mobilized in September have also dampened confidence among local retail investors that they have money to invest in the stock market. .

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Iskander Lutsko, chief investment strategist at Iskander Lutsko, said: “In a way, I find the underperformance of the Russian stock market surprising given that all the geopolitical risks are already priced in. in the first place and late sanctions, even price ceilings, are not a game changer for Russian stocks.” ITI capital in Moscow. He attributed the market’s continued slide to “lack of support from local institutional funds, while retail demand weakened due to deposit risks and outflows”.

Next year is unlikely to bring relief as wars and capital controls persist, especially if a global economic slowdown curbs demand for goods and new sanctions impose pressure. more force on the Russian economy. On Thursday, EU member states reached an agreement on a ninth package of sanctions against Russia, targeting new banks and officials as well as access to the country’s drones.

“Without fresh capital inflows, constrained by Western sanctions, Russian stocks are likely to underperform again next year,” said Matys at InTouch Capital Markets.

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