Moscow stocks captive to global selloff
RT: What's the sentiment in the Russian markets?
PW: “Well I think it is the same as you are seeing on a global scale.It is really a market that is now driven by fear.The increasing fear after yesterday’s data about another global recession took a real hold on the markets yesterday.And what clients are trying to do is to figure out where we go from here, because there are so many uncertain factors right now.To some extent you can argue that the current situation is actually more precarious than it was in 2007, given that policy makers are running out of options.China has their owns problems in trying to sort of cool down their economy.And then you have different policy options in Europe and the US, as the US is probably going to try and stimulate whereas Europe is all about austerity measures.On top of that, looking forward, if you look at what is going to happen in Europe in the next couple of months, you are going to have about $450 billion in debt by European countries by the end of the year, $250 billion of those come due in September and October.So for those two months I think we are going to see increased volatility.The good news, I think is that we don’t see the same sort of panic selling we saw in 2008.”
RT: What's the difference between the current sell-off from the one we saw last week and how deep could it be this time?
PW: “Well I don’t think there is a difference between the two, it is actually a continuation of the previous dip.With a bit of a so called dead cat bounce.But now we are continuing downward again.How far can we go? I think that’s a good question, and if I knew I would tell my broker and then I would tell you.But I think in general another 20% down, I don’t think is unthinkable.”
RT: Some say the markets are driven by low volumes as it's holiday season. But how will the situation change when everyone is back to business?
PW: “Well actually I think the volumes are more or less unchanged, and some of the days they have been pretty high on the selloff.And I think also if you look at the clients, even though they are on vacation they have been better prepared this time, because there has been a lot of bad news coming out for quite a while.So first of all they probably position themselves in a way that they feel more comfortable going on vacation, but also I think they are vacation in places where they actually have access to blackberry, internet, etc. So I don’t think there is a big difference this time around.”
RT: Meanwhile Rouble has retreated against main currencies. How deep could it fall?
PW: “Well we are currently revising our forecast. I won’t give you a specific number. But really the rouble is held hostage to what happens with the dollar and the oil price. And given that we feel it is going to get worse before it gets better, I think we can have further weakening, and that could be further accelerated by the population responding to that and shifting their savings into hard currency, and that we could see a continuation of capital flight.
But hopefully, passing October, we should have hopefully a calming situation, that might give some additional fuel for commodity prices, and therefore the currency.”