Russian stock market reaches historic high

Trader at the Moscow Interbank Currency Exchange. ©
Alexey Kudenko
The ruble-traded MICEX index on the Russian exchange hit an all-time high of 1,977.19 points on Monday. Markets have been bolstered by growing oil prices, signs that Russia is coming out of recession, and increasing foreign investment.

MICEX is calculated on the shares of Russia’s 50 biggest companies, including Gazprom, Rosneft, NOVATEK, Sberbank, Uralkali.

The biggest contributors to the Monday rally were Magnitogorsk Iron and Steel Works (MMK), which saw 2.9 percent growth, and power giant Rossetti, whose shares were up nearly two percent.

The dollar-denominated RTS index was also seen rising, reaching 967 points.

On the foreign exchange market, the ruble was gaining against major currencies. The Russian currency was trading at 64.31 rubles against the US dollar and 71.85 to the euro in afternoon trading, showing its best performance this month.

Analysts attribute the market rally to rising oil prices. On Monday, the North Sea benchmark Brent and US West Texas Intermediate crude reached monthly highs. The market is expecting talks between the world’s biggest oil exporters, Russia and Saudi Arabia, on freezing production.

However, fundamental factors can prevent oil prices from growing further.

“In our view a renewed price correction cannot be ruled out if market participants start focusing on the supply side again, for the latest drilling activity figures in the US cast doubts that the oversupply is really being eroded,” said Commerzbank analyst Carsten Fritsch.

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Positive economic data and growing foreign investment have also contributed to the rally on the Russian stock markets.

Russia is showing signs of coming out of its long recession. While gross domestic product (GDP) shrank by 0.6 percent in the second quarter of the year, this is an improvement from the 1.2 percent contraction experienced in the first three months of this year, according to federal statistics service Rosstat. The Economic Development Ministry predicts Q2 to be the last quarter of recession this year.

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In addition, the week through August 10 saw foreign portfolio investments in Russian assets increase to $65 million from a $37 million inflow a week earlier, which can be seen as a sign that investors are regaining confidence in the country’s economy.