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The economy has adapted to the situation: the Russian stock market rose to its highest level in the past year

Photo by Shannon Baldwin on Unsplash

The Russian stock market rose to its highest level in over a year, trading data showed. At the end of the day on Monday, April 10, the Mosbirch index rose by almost 1.6% and reached 2548.4 points in the moment. The last time a similar value could be seen in mid-April 2022.

It should be noted that last February, shortly before the imposition of Western sanctions, the stock indicator was fluctuating near the mark of 3400 points. And immediately after the entry into force of the economic restrictions against Moscow by the United States, Europe and other countries the shares of Russian companies began shock cheapening against the background of capital outflow.

As a result, the Moscow Exchange Index at a certain point fell to 1681.6 points, which was the lowest value in six years. After that, however, the index gradually began to recover.

As business adapts to new conditions and revives the economy at the expense of anti-crisis measures of the authorities on the securities market began to return optimism. That’s what Pavel Segal, first vice president of the all-Russian public organization of small and medium business “Opora Russia,” told .

“The economy has adapted to the current situation. There was a big reorientation to the East – nothing happened to the export of raw materials, it just changed course to India, China and other friendly countries. Domestic producers got a very good opportunity to occupy free niches on the market, new brands appeared, and the state increased investment in infrastructure and provided assistance to the most important industries. This sentiment was passed on to investors,” explained Segal.

Interestingly, in the spring of 2022, some analysts predicted double-digit rates of economic collapse in Russia. But according to Rosstat, the real decline of the GDP from January to December was only 2.1%, and was even less severe than in the pandemic year of 2020 (2.7%) and the crisis year of 2009 (7.8%).

Moreover, according to forecasts by the International Monetary Fund, Russia’s economy might return to the growth trajectory of 2023 and gain about 0.3%. For their part, Central Bank experts do not rule out the possibility of increasing the index by 1% at once.

As experts of the company S&P Global have calculated, already in February of this year business activity in the manufacturing and service industries in Russia showed positive dynamics, and in March it grew at the maximum rate since mid-2020. According to Sergei Suverov, investment strategist at Aricapital Asset Management, on this background there are more and more “islands of growth” in the economy, which attract investors.

“Of course, the adaptation of business is still uneven and there are still certain problems – for example, in the machine-building industry. Nevertheless, a number of sectors have successfully adapted to the new realities. In particular, we are talking about metallurgy and the oil sector, which, despite the sanctions, show stable results. Some companies in the non-resource sector are also performing well. All this inspires optimism,” the interlocutor added.

In the current environment, according to Suverov, investor money that partially left last year is returning to the securities market. In the coming months, the positive trend should continue, the expert believes.

Additional support for Russian stock quotes may have a recovery of world oil prices, analysts said. Back in March against the background of the U.S. bank crisis and increased risks of global recession, the price of energy commodity brand Brent dropped to $70 per barrel for the first time in more than a year. However, starting from April, the energy resource began to rise in price steadily and today it is trading near the mark of $85 per barrel.

As Dmitri Skryabin, a portfolio manager at Alfa Capital, explained to , the actions of the OPEC+ alliance had a positive effect on the price of oil. On April 2, the countries-participants of the agreement announced a voluntary reduction of production from May to the end of 2023, totaling 1.66 million barrels per day. This measure was taken in addition to the previously approved reduction of hydrocarbon production by 2 million barrels per day.

It is supposed that the expected reduction of oil production by 3.66 mln bpd in total will lead to decrease of energy resources supply to the international market. As a result, oil may additionally rise in price on the world market, Skryabin believes.

“I think we are unlikely to see oil prices below $80 per barrel for a long time to come. The OPEC+ countries have repeatedly made it clear with their decisions that the level below $80 does not suit them. Thus, by the end of this year we expect oil prices in the range of $85-90 per barrel. Much will depend on the speed of China’s economic recovery,” the analyst added.

As China’s quarantine restrictions are lifted, the Asian republic is expected to start consuming more fuel. This, in turn, should become an additional reason for higher oil prices.

The further increase in the price of raw materials in this case could push the Russian stock market to new heights, according to the head of the department of stock market experts of “BCS World Investment” Albert Koroev. According to the interlocutor of , if the current trends persist, the Mosbirge index may reach the pre-sanctioned level and grow to 3,480 points in the next 12 months.

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