Russian stocks hit post crisis high

The Russian equities markets have outperformed their global peers since the start of the year, with high oil prices, low inflation and local investors coming back to the market.

An oil price hovering above well above $80/bbl combined with almost unheard of low domestic inflation rates is renewing the focus on Russian stocks.

The drop in inflation – to 6.5% in March – is providing room for the central bank of Russia to cut rates further, after 12 consecutive cuts over the last year, and providing a new driver.

The MICEX and RTS are outperforming nearly all global peers, with heavy weight international players returning to the market, and the improving global risk environment adding further buoyancy, according to Mark Rubinstein, Deputy Research Head IFC Metropol.

“The actual numbers suggest that the activity from US based funds have increased. And that’s of course, thanks to a new relationship between the current US administration and the current Russian government.”

Russia's exchanges shrugged off the terrorist attacks on the Moscow metro, and further bombings in Dagestan – Risks like these are largely prices into Russian investments. But Igor Prokhaev, Vice President at Troika Dialog says those most familiar with the risks – domestic investors – are driving the current rally.

“Russian investors also started investing in mutual funds. So in March, probably first months in last half a year we see more or less significant inflows into Russian mutual funds. And that was kind of translated into growth on the market.”

Further support for domestic stocks came from Mondays VTB purchasing managers index. Its showed service industries growing at their fastest rate in five months, and what economists called ‘renewed momentum”. And if the Russian economy is getting traction on a rebound, stocks could have a further driver still to factor in.