Domestic Bonds

Russian stocks rebound as trading resumes on MOEX

Russia shares gained 11% on the Moscow Stock Exchange (MOEX) after the resumption of limited trading on March 24 on the ruble-denominated MOEX Russia index after almost a month of inactivity.

The Russian stock market was suspended immediately after the Russian attack on Ukraine to February 24but share prices had already been battered in the previous four months as tensions over Ukraine built.

The Central Bank of Russia (CBR) decided to let trading resume in 33 names, mostly Russian blue chips, but banned short selling and trading on the dollar-denominated Russia Trading System (RTS), the preferred exchange for foreign investors, which remains suspended.

the MOEX the index fell from 3,511 the week before the invasion to 2,470 after, where it has remained for the past three weeks. Both results are well below the peak of 4,230 set in late October just before an article appeared in the Washington Post to October 30 warning of a large-scale buildup of Russian troops on the Ukrainian border.

The big winners were Russian commodities stocks, which benefited from a surge in commodity prices caused by wartime uncertainties. However, Russia’s actions VTB Bank and national airline Aeroflot – both under sanctions – fell in volatile trading.

Energy companies posted the largest gains, with gas producer Novatek, oil majors Rosneft and Lukoil, and gas giant Gazprom all up 10-20%.

Shares in the mining giant Norilsk Nickel also gained 10%. NorNickel benefited from the favorable wind of soaring nickel prices, driven by the fear of being sanctioned. Nickel trading on the London Metals Exchange (LME) was suspended when the price of the metal, which is key in the manufacture of electric vehicles (EVs), doubled to around $42,000 per ton, before climbing to more than $100,000 per tonne, at which time trading was halted and previous agreements were terminated. The price of nickel remains up more than 120% since the start of the year.

The losers are the companies directly affected by the sanctions. Shares in Russia second lender VTB Bank were down about 5% from late February levels and Aeroflot’s share price fell about 20% at one point before paring its losses to 16%, Reuters reports.

The state to the rescue

The government has made some $10.5 billion available from the National provident fund (NWF) to support the market and the CBR said it may step in and buy shares to avoid a total market collapse. It is still unclear whether the CBR used any of this money on the first day of trading. The finance ministry did not immediately respond to a Reuters request for comment.

“Large bids to buy Russian stocks have been seen since the market opened,” BCS Brokerage said in a note, quoted by Reuters. “The general sentiment is supported by confidence that the Department of Finance will buy shares.”

Among the stock buyers were Russian retail investors. BCS GM reported that in a survey of its retail investors, three-quarters said they intended to buy shares and hold them for the “long term” while retail investors, who are now heavily invested in Russian stocks, are trying to recoup some of the money they lost in the crash from a potential rebound. Trading apps from major brokerages including Sberbank, VTB and Alfa, reported problems processing customer orders following increased interest in Russian stocks.

Oil prices hit $121 the day of the market opening and the ruble has also strengthened significantly in recent days and was trading at RUB94.9 the day the market reopened after weakening for RUB134 only two weeks ago.

RBC Governor Elvira Nabiullina also opened the OFZ domestic bond market on March 21st, which was also stabilized thanks to the intervention of the CBR and a set of restrictions aimed at limiting volatility. However, it has been reported that foreign investors have not participated in either the bond market or the stock market since the war broke out in late February.

Benchmark 10-year OFZ bond yields, which move inversely to their prices, stood at 13.65% after hitting an all-time high of 19.74% on March 21st.

©2022 bne IntelliNews , source Magazine