It has been more than a year since the Russian stock market collapsed on the news about the beginning of the CBO. The shock has passed, the domestic economy has not collapsed. But the Moscow Exchange index keeps at about the same levels as a year ago. What prevents Russian stocks from rising in price, as it happens with Iranian ones? And how to act now for those who want to make money on the stock exchange? With these questions, “Secret” turned to the experts.
Why the Iranian scenario has not been repeated in Russia
On March 3, the Moscow Exchange index by the close of trading was at the level of 2272 points. This is almost a record since the beginning of 2023. But at the same time, this is less than the day after the start of the SVO and the largest panic in the history of the Russian stock market: on February 25, 2022, trading stopped at 2470 points.
During the year, the exchange environment often recalled the experience of the Iranian stock market. It shows that even after severe Western sanctions, local stocks can grow much faster than inflation and bring good income. Why haven’t we seen this in Russia yet?
“Firstly, the Iranian scenario is not about one year, but still about a long horizon,” says Vladimir Bragin, director for the analysis of financial markets and macroeconomics at Alfa Capital Management Company. “Secondly, it assumes high inflation, from which you can hide only in real assets, which include stocks.”
Inflation in Russia in 2022 was about 12%. In Iran, it rarely falls below 30-50%.
Another reason: it is almost impossible to withdraw money from Iran, so the locals save them from depreciation on the stock exchange. Russia, on the other hand, is not completely cut off from the global financial system: there are direct commodity flows and settlements on them, said Yaroslav Kabakov, director of strategy at IC Finam.
The Russians, despite all the restrictions, have not lost the opportunity to invest in foreign instruments. Especially those who have the status of a qualified investor, noted Sofia Kirsanova, portfolio manager of the management company Pervaya. That is, we still have alternatives to the Moscow Exchange, so not all the money goes to the local market.
“As they get used to the new reality and against the backdrop of lower deposit rates, Russian investors are starting to return to the stock market, which can be seen from the increased trading volume,” Sofia says. “Therefore, it is likely that we will see the positive part of the Iranian scenario.”
What are the prospects for the Russian stock market
The experts interviewed by The Secret are generally quite optimistic. Even the conservative forecast from Pervaya Management Company is as follows: the Moscow Exchange index in 2023 is able to give investors over 25%and the dividend yield can be about 12%.
“Many companies have improved their financial performance in both revenue and profit in 2022 and expect the same dynamics in 2023. But their stock prices did not reflect these trends. And this should be used. It is not every year that such market inefficiencies occur,” says Sofia Kirsanova.
Moreover, Russian companies are gradually returning to the publication of reports. Sberbank, PhosAgro, Rosneft and others have already done this, lists Andrei Vanin, head of the financial market analytics service at Gazprombank Investments. “This allows us to present a general picture of the state of the issuers,” he said.
Vitaly Isakov, Investment Director of Otkritie Management Company, names even more pleasing numbers. According to him, in the next three years the Russian stock market could triplethat is, to give about 50% yield per annum on the horizon of three years.
He notes that if we consider the yield of Russian stocks with dividends, then the picture is not so gloomy now. The Moscow Exchange Total Return Index (taking into account the receipt and reinvestment of dividends) on February 24, 2023 was 18% higher than the closing levels on February 24, 2022.
But as long as the geopolitical confrontation continues, any aggravation of the situation could break all such forecasts, warns NES professor Nikolai Mrochkovsky. He admits that there will indeed be a rapid growth of the market, especially after the end of the CBO. But no one knows how long it will take until that moment.
Mrochkovsky also admits that new sanctions will continue to hit the Russian economy as a whole and individual companies. And Russia will fully feel the effect of the already adopted restrictions only in 2023, reminds Andrey Vanin.
All this uncertainty is the main brake on the market.
How to act now
In the meantime, the market is flat, quotes are marking time for months. This mainly applies to blue chips. And this can last quite a long time, recognizes Yaroslav Kabakov.
At the same time, the quotes of individual medium or small companies suddenly shoot up by tens of percent. And then just as quickly they return to their place.
For example, on January 24, the shares of Nizhnekamskneftekhim grew by 26%. Three days later, the papers of the Human Stem Cell Institute (HSCI) shot up 11.4%. On February 16, Kuibyshevazot (+15%) flew, and the next day it was the turn of Kazanorgsintez — +12.1%.
The question arises: why not wait for the whole market to finally go up, but just catch such a wave and, let’s say, complete the annual plan in a couple of days?
Experts unanimously discourage such an idea.
“With a high probability, such ups are the result of market manipulation, and the vast majority of private investors will lose money on these movements,” explains Vitaly Isakov.
Such slides are not for investors, but for speculators, Nikolay Mrochkovsky echoes. That is, for those who live in the market, are engaged in technical analysis (that is, they determine patterns according to the schedule) and earn professionally on the stock exchange. It is dangerous for ordinary investors, especially beginners, to play such games, the expert emphasizes.
“In the securities of the second or third echelons, now there are inevitably heavily undervalued ones. They can be selected based on a long investment period, says Vladimir Bragin. “If suddenly the previously purchased paper starts to “accelerate” without any news and data, then I would use this moment to close the position.”
The interlocutors of the “Secret” are inclined to believe that now time for long term investors. That is, for those who can buy shares for several years and “forget” about them. And be prepared to wait a very long time.
