Translated material
Ruble feels better
The dollar rose in price by 70 kopecks
The beginning of the week did not bring calm to domestic financial markets. The ruble fell significantly yesterday against the dollar and euro. The official dollar exchange rate increased by 2.9% - from 23.87 to 24.57 rubles, the euro exchange rate - by 1.3%, from 36.3 to 36.78 rubles. Market participants hope that the depreciation of the national currency is a temporary phenomenon associated solely with the escalation of the military conflict between Russia and Georgia . A similar opinion is shared by the head of the Ministry of Finance, Alexei Kudrin, who yesterday assured the public that the Central Bank is in full control of the situation. To implement this control, the Bank of Russia had to seriously increase its presence in the foreign exchange market.The global trend of dollar strengthening in the Russian market is strengthened by the fact that non-resident investors continue to get rid of ruble assets. Despite the fact that yesterday the stock market closed with a gain of 1.18% according to the RTS index, it is too early to talk about stabilization.
Having opened yesterday at the level of 29.77 rubles. to the bi-currency basket against 29.61 rubles. at the close of trading on Friday, by 11 o'clock in the afternoon, ruble quotes reached the maximum value of 30.1 rubles during the existence of the new composition of the basket (0.55 dollars and 0.45 euros). At this level, the weakening of the ruble stopped and was replaced by strengthening. The Bank of Russia entered the market with the sale of foreign currency to satisfy the large demand from non-residents. According to dealers' estimates, on Friday the Central Bank sold approximately $6 billion, despite the fact that the volume of dollar trading on the MICEX was a record, exceeding $14 billion. After lunch, ruble quotes against the basket reached 29.73--29.74 rubles, having won back half of the morning fall, after which the Central Bank left the market and ruble quotes began to decline again, traders emphasize. Due to the withdrawal of non-resident funds from ruble assets, the shortage of ruble liquidity among Russian participants worsened, since the Central Bank was the main seller of currency and the main buyer of rubles. At the same time, experts believe that yesterday’s decision by the Ministry of Finance to allow the Housing and Communal Services Reform Assistance Fund to place 180 billion rubles. in the interbank market should reduce the liquidity deficit.
As Alexey Kudrin said yesterday, the events in South Ossetia cannot change the fundamental indicators of the Russian economy and the ruble exchange rate is currently in a reliable corridor, which is controlled by the Central Bank. “From the point of view of fundamental indicators, Russia is not afraid of any fluctuations at the present time,” said the head of the Ministry of Finance and added: “We learned good lessons after 1998.”
Analysts are also not inclined to dramatize the situation on the foreign exchange market, although the fate of the ruble in the near future remains unclear. “We have seen a significant strengthening of the dollar against the backdrop of demand from non-residents, but at the moment the fluctuations of the ruble are so volatile that it is very difficult to make any forecasts,” emphasizes Stanislav Kleshchev, an analyst at the investment department of VTB-24.
“We do not rule out continued weakening of the ruble, especially if there is an escalation of the military conflict,” notes Stanislav Ponomarenko from ING. “However, in any case, the current depreciation of the ruble is only a temporary phenomenon, since macroeconomic indicators continue to provide serious support to the Russian currency.”
There was increased volatility on the stock market on Monday, from which Russian indices managed to emerge in positive territory. At the end of the session, the RTS index increased by 1.18%, to 1,742.96 points, and the MICEX index added 3.87%, to 1,412.25 points. “The war in South Ossetia and cheap raw materials continued to pull Russian stock prices down,” notes Alexander Chabanov, an analyst at Brokercreditservice. “Shortly after the opening, the market sank 5.5%, but then also sharply rebounded into the positive territory.”
“At the beginning of trading, there was a drop in the market, trading took on a panicky nature,” says Sergei Sheikov, managing director for work with corporate clients at the Olma Investment Fund. “By the middle of the day, the downward movement had stopped, and signs of recovery appeared in individual highly liquid securities.”
Investor optimism was facilitated by the favorable situation in Western markets. “Futures for American indices were trading in positive territory all day,” notes Alexander Chabanov. He also says that at some point the Russian actions were helped by Georgian President Mikheil Saakashvili. Western investors, having heard statements from Tbilisi about readiness for a ceasefire, believed that tensions were easing. Domestic indices grew mainly due to companies in the oil and gas sector. “The heavyweights—Gazprom, LUKOIL and Rosneft—felt the best,” says Mr. Chabanov. -- The Oil and Gas Composite Index settled 3.09% above Friday's close." Shares of LUKOIL rose by 3.15%, Gazprom by 5.64%, and Sberbank by 5.22%. At the same time, Norilsk Nickel shares fell by 4%.
However, geopolitical tensions caused by the Russian-Georgian conflict led to a negative opening of the American stock market. According to American analysts, investors fear a renewed rise in oil prices, as well as worsening problems in the financial sector. By the beginning of the session, the Dow Jones index fell by 0.44%, and the Nasdaq index fell by 0.26%. “Military-political risks make opening any positions risky,” warns Mr. Chabanov. “The market could theoretically go even lower.”