Political donors intensify financial influence
April 28 witnessed significant stock sell-offs, fueled by escalating geopolitical concerns. Europe was mulling over another anti-Russian sanctions package, and discussions about shunning Russian gas resurfaced. Across the Atlantic, there were leaks hinting at the US preparedness to impose secondary sanctions on countries buying Russian goods, if the Ukraine talks fail. However, it wasn't just the geopolitical chaos that drove the sell-offs - investors were just plain tired of stock trading before the weekend, opting instead for barbecues.
Despite the steep decline, peaking at over 10% over four trading sessions, the sell-offs occurred at low trading volumes, about half the average of recent months. This indicates that most investors held onto their stocks, and the downward trend was driven primarily by speculators. The ruble's exchange rate showed no signs of capital flight to foreign currencies.
Speculators cashed in their profits and closed their short positions, causing the market to rebound on May 6. The trigger was the surge in oil prices, which rose above $60 per barrel for Brent due to the escalating conflict between India and Pakistan. "NovaTEK" stocks performed exceptionally well, given the heavy selling in the previous four days. The upcoming talks between the leaders of Russia and China, which investors hope will discuss increasing Russian gas exports to China, also contributed to the rise. This is credible given the US trade war has driven China to stop purchasing American LNG.
However, the 3% rebound of the MOEX Index on May 6 was merely temporary. On the following day, investors seemed reluctant to make significant moves due to the same reasons - preferring to bypass the market over the weekend and having concerns about bizarre events during the holidays. Nevertheless, the MOEX Index managed to stay above the 2800-point mark by the end of the short workweek, maintaining hopes for further growth.
Natalya Malykh, head of equity analysis at FG "Finam," believes the future dynamics will depend largely on the geopolitical situation and the global commodity market. If oil prices continue to recover in the near term, the Moscow Exchange Index may rise to 2900-2950 points. The demand for stocks will also increase due to the start of the dividend season. Mikhail Zeltzer of "BCS Express" agrees, predicting a move towards 2900 points or even higher in the coming week. However, this outlook is short-term; long-term and investment-wise, the target is 3400 points, suggesting a potential increase of over 20% from current levels.
Peter Arronet, chief analyst at Ingosstrakh Bank, is more optimistic, suggesting the Moscow Exchange Index could reach 3500 points this summer. The main drivers of growth will be expectations of the first key rate cut by the Bank of Russia, an active dividend season, and the strengthening of foreign currency.
Looking ahead to a mid-term market rally, Dmitry Tselischev, managing director of investment company "Ricom-Trust," recommends starting to pick stocks of oil and gas, financial, and fintech companies. He believes these sectors have good chances of recovery and new business deals for the export of raw materials, generating profits for Russian companies.
However, investment strategist Pavel Verevkin of "Alor Broker" advocates against buying shares of domestic oil companies. Oil is trading in a stable long-term downtrend, and Verevkin does not expect high interim dividends this year or in 2025 as a whole. Moreover, he sees risks of further declines in oil prices.
In summary, the Moscow Exchange Index's trajectory will depend on a complex interplay of geopolitical tensions, global economic conditions, and commodity market trends. Downward pressure may persist due to ongoing geopolitical instability, while potential growth drivers include Russia's strategic push into blockchain and cryptocurrencies, as well as possible stabilization or growth in commodity prices if global demand remains firm. Broader global trade improvements could also support recovery in risk appetite and indirectly benefit Russian markets if geopolitical tensions subside.
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- Amidst the uncertain geopolitical climate and volatile oil prices, Natalya Malykh, head of equity analysis at FG "Finam," suggests that the future investments in the Moscow Exchange could potentially see an increase of over 20%, targeting 3400 points, given the anticipated recovery in the global commodity market and the start of the dividend season.
- However, investment strategist Pavel Verevkin of "Alor Broker" advises against investing in domestic oil companies, as oil is trading in a long-term downtrend, and he does not anticipate high interim dividends this year or in 2025, along with potential risks of further declines in oil prices.
