‘Make IMOEX Great Again’

Stay informed with free updates

Vladimir Vladimirovich Putin is presumably having a very nice day indeed, with chatter between traders since Donald Trump’s election victory having apparently turned to whether Russian assets are once again back in play.

One portfolio manager, who asked not to be named, told FT Alphaville earlier today:

All the talk this morning is about how to trade Russia and whether sanctions will be thrown off . . . [traders at Western banks] are questioning suddenly whether the rouble is now tradeable.

They pointed out that a few Western banks do still trade the rouble offshore via non-deliverable forwards, a kind of derivative that allows investors to bet on the price of the currency at any given time.

But this is still depressing stuff, even if it’s not all that surprising: Russian stocks rose in the hours following Trump’s win, boosting the rouble-denominated MOEX index of top Russian stocks by 3.6 per cent.

Although the rally has since fizzled out, the intraday jump was the index’s largest since August.

Russian energy giants Gazprom and Novatek were among the best performers, both rising nearly five per cent shortly after the opening. Online marketplace Ozon rose most, while Aeroflot initially added 6 per cent. AFK Sistema, Alrosa, Tatneft, Unipro, TKS Holding and MMK all gained ground.

Embracing the new world-order, Moscow-based Tinkoff Investments, a brokerage platform, on Wednesday put out a note entitled “Make IMOEX Great Again” — which we’ve shamelessly cribbed for our headline.

The “optimism of Russian investors is determined by their geopolitical hopes,” declared chief economist Sofya Donets, who isn’t quite as optimistic about the potential rollback of Western sanctions as some Western traders.

The mood in Moscow is otherwise pretty upbeat, however.

“This is what [Russian investors] have been waiting for, because the stock market and war are not very compatible, and doubtless any sign of a possible end to war is interpreted by investors in a very positive way”, said Sergey Romanchuk, former head of trading at Russia’s Metallinvestbank.

“The majority of investors think that the victory of Trump is preferable for the Russian government, as he has promised in one way or another to stop the military conflict in Ukraine,” he added.

The fun wasn’t confined to the motherland. Austria’s Raiffeisen Bank International, which remains the largest Western bank still operating in Russia, was the second-best performer on Europe’s Stoxx 600 index in midday trading, up eight per cent — with trading volume nine times the average for this time of day, according to Bloomberg data. More than half of the bank’s €1.3bn in global profits for the first six months of 2024 came from its Russian and Belarusian operations, it said in July.

Trump had in the past claimed he could end the war in Ukraine “in 24 hours” if he were to get into the White House, but suggested he would do so by pushing for a peace agreement at the price of Ukraine ceding territory to the Kremlin.

Russia’s stock market collapsed immediately after the country invaded Ukraine in February 2022 and western governments imposed crippling sanctions on its financial system. Ukraine’s US dollar debts rallied on Wednesday, as did its GDP warrants (securities issued under a previous debt restructuring that link payouts to economic growth).

The Kremlin responded to the initial sanctions by blocking most foreign traders from exiting their investments and capping the amount of money Russians can stash in foreign bank accounts.

The MOEX index had been sliding since May, as the Central Bank of Russia pushed ahead with its aggressive monetary tightening campaign, taking the key rate to 21 per cent — a level last seen in 2003. Rates are forecast to remain above prewar levels until 2027.

“Investors are trying to find some news that could mark the bottom of the market”, Romanchuk added. Maybe that moment has arrived.

Further reading:
— Russia fines Google more money than there is in entire world (BBC)

#IMOEX #Great