The MOEX Russia Index has shown notable resilience, reaching pre-war levels in May 2024 after a significant decline following the onset of the Ukraine conflict.
Several key factors contribute to this resurgence:
- Shifting Investment Landscape: Western sanctions have limited foreign participation in the Russian stock market. This gap has been partially filled by an increase in domestic retail investment and capital inflows from allied nations, providing crucial support for the market’s recovery.
- Robust Corporate Performance: Boosted by the global rise in energy prices, many Russian companies, especially in the energy sector, have reported strong financial results. This financial health, with rising revenue and profitability, has enabled continued investment in operations and dividend distributions, attracting domestic investors seeking promising opportunities.
- Renewed IPO Activity: The Russian IPO market, which experienced a boom in late 2021, was significantly impacted by the war. Nonetheless, there are signs of a cautious revival in domestic IPO activity, indicating a return of investor confidence in the local market.
However, several challenges persist:
Sanctions and Foreign Investment: The full impact of Western sanctions on the Russian economy remains uncertain. Restricted foreign investment continues to limit overall market liquidity, potentially hindering future growth. Additionally, sectors dependent on foreign technology or components may face long-term constraints.
Geopolitical Uncertainty and Military Expenditure: The ongoing war in Ukraine and associated geopolitical uncertainty continue to weigh on the Russian economy. Increased military spending, while benefiting some sectors in the short term, could strain the Russian treasury in the long run.
Turkey’s Potential Role in Sanctions Busting:
The article also highlights a concerning trend: Turkey’s potential role in facilitating the re-export of Russian oil products to Europe. If confirmed, this practice could undermine the effectiveness of sanctions aimed at limiting Russia’s war chest. Further investigation and potential sanctions enforcement actions by the international community may be necessary to address this issue.
In conclusion, the resurgence of Russia’s MOEX index presents a compelling case study. While domestic factors have bolstered the market in the short term, the long-term trajectory remains dependent on the evolving geopolitical landscape, the effectiveness of sanctions, and the overall health of the Russian economy. The situation surrounding Turkey’s potential role in sanctions circumvention adds another layer of complexity to this evolving story.
MOEX Long (Buy)
Enter At: 3535.87
T.P_1: 3724.67
T.P_2: 3992.71
T.P_3: 4300.33
T.P_4: 4522.69
T.P_5: 4767.57
T.P_6: 5105.74
S.L: 3079.14
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