Russian Stocks Plunge 44% in 2022

Russia’s MOEX Russia index closed Friday at 2,154, plunging 44% on the year. The ruble-based index reflected the fallout from the Russian invasion of Ukraine and consequent sanctions by Western countries. Russia’s action triggered investor’s exodus from oil and gas companies to McDonalds. The Moscow Exchange and the Central Bank of Russia both attempted to halt the selling, including closing the stock market for one month at the end of February, banning foreign investors from “unfriendly” countries, and prohibiting short selling. At the same time Russian companies were excluded from foreign bourses and global equity indexes.

The MOEX Russia Index is a stock market index that tracks the performance of the largest and most liquid stocks listed on the Moscow Exchange (MOEX). It is a market capitalization-weighted index, meaning that the weight of each stock in the index is determined by its market capitalization (the total value of its outstanding shares).

The MOEX Russia Index is comprised of 50 stocks, representing a diverse range of sectors, including energy, banking, telecommunications, and industrials. Some of the most well-known companies listed on the MOEX Russia Index include Gazprom, the largest natural gas company in Russia; Sberbank, Russia’s largest bank; and Rosneft, Russia’s largest oil company. The MOEX Russia Index is considered to be a benchmark for the Russian stock market and is widely followed by investors both within and outside of Russia.

Russia’s Monolith Companies Prices Gutted

  • Oil giant Lukoil closed the year down 40% amid embargoes and sanctions against Russian oil that sent Urals benchmarks plunging.
  • Gazprom sank 54% despite posting record profits, as the Russian state heavily taxed its profits to finance its war chest.
  • Sberbank fell 53% as the West excluded Russian banking from the Swift system, isolating the Russian economy.

A Pivotal Moment … Putin formally recognizes the Russian-backed separatist quasi-states Donetsk and Luhansk People’s Republics Independence culls MOEX 14%

Tensions between Russia and Ukraine continued to soar after Russia’s parliament appealed to Putin to formally recognize the Russian-backed separatist quasi-states Donetsk and Luhansk People’s Republics independence, in the Donbas region in Ukraine. Such a move Germany’s Scholz says would be a one-sided breach of Minsk format. This would torpedo the peace process and sent the MOEX Russia Index dumped as much as 14% with Rosneft (-18.3%), VTB (-17.3%) and Sberbank (-16.9%) hit. The Rouble shed over 2% on Monday.

The Rouble backed MOEX Russia Index crashed 14% to close at 3037 on Monday, the lowest level since November of 2020. The fall was the steepest daily loss since March of 2014, amid continued threats of war in Ukraine.

President Putin signed a decree recognizing the independence of the separatist republics of Luhansk and Donetsk.

“I deem it necessary to make a decision that should have been made a long time ago — to immediately recognize the independence and sovereignty of the Donetsk People’s Republic and the Luhansk People’s Republic,” he said.

He used his speech to frame Ukraine as the aggressor. “Those who seized power and keep power in Kyiv, we demand they stop the hostilities immediately”. “Otherwise, all the responsibility for the possible continuation of the bloodbath will be on the conscience of the regime that is ruling in Kyiv.”

Mr Putin described eastern Ukraine as “historic Russian land” to which his country was “connected by blood”. In a long passage that resembled a discursive history lecture, he said Ukraine as a whole was a creation of the Soviet Union.

Russian Stocks Hammered

Sanction exposed stocks plummeted following reports of shelling and escalated military tension in the self-proclaimed Donetsk and Luhansk People’s Republics. President Putin had said he was considering requests by both regions to be recognized as independent states, strengthening the expectations that Moscow could openly deploy troops.

Rouble (Ruble) Under Fire

MOEX

The Moscow Exchange, also known as MOEX, is the largest exchange group in Russia, offering trading in a wide range of financial instruments, including equities, bonds, derivatives, currencies, and commodities. The MOEX is home to Russia’s main stock index, the MICEX Index, which is a market capitalization-weighted index that tracks the performance of the largest and most liquid stocks listed on the exchange.

The MOEX also operates the RTS Index, which is a price-weighted index that tracks the performance of the 50 most liquid stocks listed on the RTS Stock Exchange, a subsidiary of the MOEX. In addition to its equity markets, the MOEX also operates Russia’s main debt market, as well as a number of other financial markets, including a foreign exchange market, a money market, and a derivative market.

Source: Reuters, TC, MOEX

From The TradersCommunity Global Research Desk