The exchange is growing

Last week, the Moscow Exchange index updated its historical record for three days in a row and, despite a slight decline on Friday, trading on Friday ended above the 2,500 point mark. In just over a month, the index added almost 10%, and in dollar terms, due to the growth of the ruble, by 13–14%, this allowed the Moscow Exchange index to enter the top five leading stock indices of developed and developing countries in recent weeks. Indices grew stronger only in Latin America and Turkey; most other stock indicators grew by 5–10%.

The RTS index, which is calculated through the value of shares in dollars, also increased, but updated only a nine-month maximum (the indicators of 2008 and even 2011 are still unattainable: 2368 and 2052 points, respectively, versus 1209 now).

The growth, which is typical, has already continued for the fourth week; there has not been such a rapidly and confidently growing stock market in Russia for a long time. There are several reasons for this.

Firstly, the Federal Reserve kept the rate unchanged, as expected, but the commentary released when this decision was published turned out to be softer than analysts had expected. Thus, it is now expected that the rate may be increased in the foreseeable future, which will make dollar loans cheaper and, accordingly, make money more accessible. This, as a rule, leads to economic growth and inflation - therefore, the regulator resorts to such a policy in the event of emerging problems in the economy. However, the American economy is now growing at a good pace, so no one expected the Fed to ease monetary policy.

But the Fed’s decision had the same impact on all markets, and the Russian one is growing additionally due to the situation on the energy market. In January 2019, prices for European oil grades increased by 16%. On Friday, the price of North Sea Brent for delivery on the nearest date almost reached $63 per barrel. This is due, among other things, to the production restrictions within OPEC+ that came into force at the beginning of the year, as well as to the political crisis in Venezuela.

Against the backdrop of all this, foreign investment funds are showing interest in the Russian market. According to Emerging Portfolio Fund Research, in one week, from January 24 to January 30, $160 million entered the Russian stock market through foreign funds. And for the entire January - more than $540 million. This is the best result since January 2018. Similar figures were observed a year ago, when international funds invested about $1.5 billion in the Russian stock market in a month, largely thanks to the careful and reassuring statements of American politicians regarding anti-Russian sanctions. A few months later, however, sanctions were introduced against Oleg Deripaska and his companies; they were lifted from Rusal only at the cost of Deripaska giving up control over the company.

But the story with Rusal is, of course, also of great importance for the Russian market. Firstly, it showed that it is possible to achieve the lifting of sanctions, which was previously thought to be practically impossible, and secondly, it became clear that the American administration still pays more attention to protecting its own investors rather than restricting Russian companies. And this seems to be doing very well for the market.