Daily Journal:

Putin’s words are not intended for professionals, but for people who do not understand how the economy works or how stock markets work. This is a typical propaganda statement aimed at shifting the responsibility for economic difficulties in the country to America, to some external enemies. In reality, the problem has two components: a technical one, which explains what is happening with trading, and a fundamental one. As for the technical, it must be said that no one has suffered such damage from trading on Russian stock markets in the last two or three months as the Russian authorities themselves, who constantly suspended trading, essentially prohibiting investors from trading in securities and determining their objective price. We remember that trading on Russian exchanges was closed for many days, and because of this, there was a sharp shift in the ratio of trading volumes of Russian securities; now they are mainly traded in the form of depositary receipts on Western exchanges, because trading is not stopped there. Violation of investors' rights to participate in trading is a very serious blow to the stock market, which the Russian authorities inflicted with their own hands. Prime Minister Putin does not understand the economy well enough, so he says rather stupid things about how the value of a business is higher than the value of shares on the stock exchange. In fact, the stock exchange is precisely the place where an objective assessment of a business is determined, based on a whole set of conditions, in particular, not only the value of assets that are currently on the balance sheet of a particular business, but also the assessment associated with the way investors see the risks associated with running a particular business. Investors evaluate the long-term prospects of a particular stock rather than its current economic condition, which may be unstable due to risks. Judging by Putin's words, he simply does not understand how this whole mechanism works. It’s a shame for Russia that it has such an unprofessional and illiterate prime minister. As for fundamental factors, firstly, today trading in Russian shares, their assessment by international structures, international investors and the assessment of their business value cannot be isolated, it is impossible to separate on how the global economy functions. From Putin’s words it follows that good business in Russia should not be affected by the problems of the global economy. In fact, the entire Russian economy is certainly very much tied to interaction with the global economy. We cannot live in isolation. For example, many of the goods that we produce are exportable, they are sources of income flow into the economy, sources of economic growth. And the global economic crisis reduces the demand for Russian export goods, and they become less needed in the world than before. Therefore, to say that we can find demand for these goods without communicating, without interacting with the global economy is simply stupid. I don’t really understand what kind of objective assessment of business, not related to the international situation, Putin is talking about - of course, an objective assessment of Russian shares is connected with the fact that there are problems in the world today, there are already serious prospects for a recession in the global economy, and this will also hit Russian companies that do not operate in airless space. Secondly, recent months have shown that capital flight from Russia has been stronger than from other emerging markets, that is, Russia is performing worse than China, worse than India, worse than Brazil, worse than the Middle East. Investors are assessing the risks of operating in Russia more seriously. In my opinion, this has a very clear explanation, connected with the fact that in recent months investors have had the opportunity to see that Russia, despite all the rhetoric, is a country of serious risks, it is a country where raider attacks on business continue, it is a country that started a war in Georgia and achieved a subsequent extremely serious confrontation with the West, the consequences of which are unknown. Therefore, Mr. Putin will not be able to shift responsibility solely to other countries in determining the value of Russian shares. Their sharp decline is evidence that the risks of working in Russia are truly serious. We see how capital is fleeing the country; $75 billion was the outflow of capital in September and October alone. This suggests that not only foreign, but also our, Russian, money is fleeing Russia. People do not trust the business climate in the country and are trying to protect their capital by transferring it to other countries. In fact, Prime Minister Putin should first of all think about how to regain this trust. But, unfortunately, he is busy passing the buck. I expect that this statement of his will, unfortunately, be followed by a new round of restrictive measures, which will contribute to the fact that capital’s confidence in Russia will decrease even more and will be associated with new negative consequences for our economy. For Putin, PR in front of the broad masses of the population is more important than overcoming the economic difficulties associated with the crisis. I think that he probably realizes that today it is better to speak with investors in a different language, but he has made a clear choice for himself in favor of PR - this has been his main focus for the last nine years; as we see, he can’t do anything else .