Translated material
Election stagnation
Investors are not interested in presidential elections
The uncertainty in the mood of stock market participants before the presidential elections can be called symbolic. Considering the predetermined result, it is not yet clear to investors how exactly the government in the country will function under the new president. However, in fact, the market volatility on Friday was caused by external reasons that had nothing to do with the elections. As of Friday's results, the RTS index lost 0.84% to 2063.94 points. The MICEX index fell by 1.72% to 1,660.42 points. Currency quotes were also influenced only by external factors.Against the background of the deterioration of the American economy, the ruble to dollar exchange rate increased by 0.5% - from 24.12 to 24.0023 rubles. During trading, US currency quotes fell below 24 rubles, which is the lowest level since May 1999.
Investors have already demonstrated their attitude towards Dmitry Medvedev's candidacy on December 10 last year, when his nomination was announced. Despite the lack of external positive, domestic indices then updated their historical highs and grew within 2%. Market participants explained their reaction by saying that they consider Dmitry Medvedev the most liberal and “closest to real business” of all the candidates for successor. And although the main thing for investors is not the personality of Mr. Medvedev himself, but the continuation of the previous course and stability, the reaction would hardly be so positive if, for example, a representative of one of the power clans close to Vladimir Putin was approved in his place.
“ Opinion polls show that Dmitry Medvedev is likely to start his presidency in a good position,” said Tatyana Orlova, an analyst at ING Wholesale Banking Russia. -- Its popularity is mainly based on promises of stability, both political and economic. We expect that Vladimir Putin, who agreed to serve as Prime Minister under President Medvedev, will remain the leader and chief policy coordinator in the Putin-Medvedev pair. According to our scenario, there will be no major policy changes after the elections.”
“On the eve of the most important political event of the four years, the Russian market showed multidirectional fluctuations, trying to counter the negative trends that prevailed in global stock markets,” says Promsvyazbank analyst Oleg Shagov. -- Leading European indices fell on Friday on concerns about the deepening credit crisis and the health of the financial sector after US Federal Reserve Chairman Ben Bernanke hinted at possible defaults and bankruptcies of mid-sized and small US banks hit hardest by the mortgage crisis."
A rather negative external background had developed before the opening of domestic exchanges on Friday, says Igor Kaznacheev, leading analyst at Investcapital Management Company: “American and European exchanges closed in the red on Thursday; a downward trend also prevailed on Asian exchanges.” In the morning, Russian indices managed to grow against the backdrop of high oil and gold prices, but then turned around and rushed down after Europe and American stock futures, the expert states. Only Gazprom shares managed to grow by 0.46%. Sberbank securities lost 2.92%, Norilsk Nickel - 2.54%, RAO UES - 0.85%, LUKOIL - 0.27%.
As history shows, the interest of stock market participants in presidential, as well as parliamentary, elections has faded over the years. Already in 2004, the expected victory of Vladimir Putin caused virtually no reaction from investors. A week before the elections, investors mostly took profits, and the RTS index fell by almost 3%. At the end of the day after the elections, the index increased slightly. Let us remind you that the incumbent president then won with an unprecedented number of votes - 71.3%. Just like the current elections, previous elections excluded the possibility of any intrigue and the possibility of a second round. Veterans of the political struggle - the leader of the Communist Party of the Russian Federation Gennady Zyuganov and the head of the LDPR Vladimir Zhirinovsky, as well as the leader of Yabloko Grigory Yavlinsky refused to participate in the elections. Deputies were nominated from the communists and Zhirinovites, and Irina Khakamada acted as the only liberal candidate.
Even in 2000, market participants had no doubt about the victory of Vladimir Putin, to whom Boris Yeltsin, leaving the Kremlin ahead of schedule, ordered: “Take care of Russia!” In anticipation of Putin's election, the RTS index rose by 5% the day before the elections. However, the main interest for investors was whether he could win in the first round. Mr Putin won more than 52% of the vote, almost doubling his closest challenger Gennady Zyuganov. Against this background, in the first minutes of trading, most blue chips rose in price by about 5%. However, the joy of victory was spoiled by the Americans. On that day, under strong pressure from the United States, OPEC decided to increase oil production quotas by 2 million barrels per day, which led to a fall in oil prices. This could not but affect domestic securities. Many players chose to take profits, and at the end of trading, Russian indices fell by almost 2%.
However, the elections of 12 years ago were of greatest interest from the point of view of stock market players. Russian investors, who were not happy with the prospect of changing the economic course and nationalization in the event of Gennady Zyuganov's victory, awaited the 1996 elections with increased nervousness. As you know, the ratings of the first president of Russia fluctuated between 5-6%. In the first round, Boris Yeltsin was 3% ahead of Gennady Zyuganov, which encouraged investors, and the RTS index grew by 13% the next day. The day before the second round of elections, market participants felt confident, and the RTS index gained more than 5%. Yeltsin and Zyuganov received 53.82 and 40.31% of the votes, respectively. Against this background, Russian investors began to rapidly make purchases, but American investors could not support them - in the United States, July 4 was celebrated as Independence Day and the markets did not work. As a result, domestic indices increased within 10%.