Russian stock market and ruble continue to decline
This is happening against the backdrop of expectations for tomorrow's Central Bank meeting. The Moscow Exchange index is losing about 1% at the moment, the dollar exchange rate on the over-the-counter market is rising above 79 rubles. Investors are factoring in the likelihood of a sharp reduction in the key rate
The Russian stock market continues to trade in the red zone. By midday, the fall of the Moscow Exchange index accelerated by 1% to 2811 points.
The ruble is also suffering losses: the yuan-ruble pair rose to 11 rubles 1 kopeck - for the first time in almost two months. The dollar exchange rate on over-the-counter trading exceeded 79 rubles for the first time in three weeks.
Finam senior investment consultant Timur Nigmatullin comments on volatility in the currency market:
— So this is volatility for now, not a trend yet?
— The market simply plays off the news flow. Some trend can be identified in fact in a few months. That is, it does not work like that. This is a local distortion of supply and demand. It could be someone selling currency, someone buying at the moment — and not fundamentally.— But, on the other hand, many people on the market say that by the end of the year the ruble will fall quite significantly against both the yuan and the American currency. Do you agree with these assessments?
— The problem with such forecasts is that they are not only about the weakening of the ruble, but also about the strengthening of the yuan and the dollar in the basket of world currencies. And this is far from a fact that will happen. The yuan and the dollar weakened due to the trade wars of these two countries, two economies of the world, and forecasting a combination of two factors at once is a rather dubious idea. If, for example, we give a forecast for the euro, I think that yes, the ruble may well weaken by 10-15%. For the yuan and the dollar, it is too complicated, a multi-factor forecast.— Yesterday there were negotiations in Istanbul. How do you think the market reacted to the results that were officially announced?
— If you mean the stock market, the stock market, I think there is no significant reaction and it is unlikely to be. Let me remind you that earlier, at local maximums — if you do not take into account dividends — and at historical maximums, if you take into account dividends, the Moscow Exchange index reached at a time of rather tense geopolitics with low Central Bank rates. That is, low rates from the Central Bank are important for Russia, low inflation is an important factor.— The Central Bank factor will probably also matter tomorrow. What are you waiting for and how will the stock market react?
— If we make specialized calculations, the Central Bank rate should decrease by about 2–2.5 percentage points. I think that a decrease of three is quite possible — under certain circumstances, with a lower probability. This is quite possible, but not the baseline scenario yet.
Currency fluctuations are directly related to tomorrow's meeting of the Bank of Russia and the expectation of a reduction in the key rate. The regulator's comments on the decision and prospects will also be important.
Kirill Klimentyev, investment analyst at Skyfort Capital, talks about forecasts and market reactions:
— Almost everyone has been expecting devaluation for several months, but there were no trigger factors for its occurrence. Now this factor could be a rate cut. Let me remind you that everyone was initially expecting a rate cut by 1 percentage point, and now we have news, including public figures announcing a 3 percentage point cut. And the lower the ruble rate, the more attractive foreign currencies become, in particular, now it is the yuan and the dollar. There is reason to believe that the rate will be cut. Our forecast is 2 percentage points , because we see the emerging business statistics — how difficult it is in the real sector. And yesterday we also saw the first deflation in the last year, which indicates that the Central Bank is doing an excellent job of its main task — namely, containing inflation.
- Good. Russian stock indices are also falling. What is this? Also waiting for the rate or maybe geopolitics?
— Geopolitics — there is no progress. No significant information came out after yesterday's negotiations. But let me remind you that last week — precisely on forecasts about lowering the rate — we grew very strongly. Therefore, even on the fact that the rate will be lowered by 2% (our forecast), the index may fall for three days, because this is most likely already included in the price.
— And by the way, how will the ruble behave if this forecast of yours comes true?
— Most likely, there will be a smooth devaluation of the ruble. In general, we expect that the ruble will devalue by the end of the year to the range of 85-90 per dollar, the yuan — to 12-12.5.
— What can you say about the oil market? Right now the growth is 7 tenths of a percent, Brent is almost 69. What are the prospects here, the summer is not over.
— Globally, $70 for Brent is, as we see, an equilibrium price without any major geopolitical shifts. Until we have additional news from the Middle East and from the US President, we will most likely be bargaining around this level.
The bond market also responded positively to yesterday's inflation data. The RGBI index is growing steadily, above 118 points, and is one step away from the maximums since March last year. For the first time in a year, deflation of 0.05% was recorded in the week from July 15 to 21, and annual inflation fell to 9.17%. The rate of decline in the indicator exceeds the Central Bank's forecasts, which gives the regulator the opportunity to continue the course of easing monetary policy.
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