The Moscow Exchange reported a new stock market crash which many experts said had happened due to rising geopolitical risks. The Moscow Exchange Index has fallen below 3,400 points for the first time since December 14, 2021, while the RTS Dollar Index has fallen below 1,400 points for the first time since February 4, 2021, under the onslaught of panic selling.
It was accompanied by forced closure of marginal positions due to increased geopolitical risks around Russia. The Moscow Exchange and RTS indices tested the 3,300 and 1,360 point boundaries respectively in the fall, showing their highest downturn since March-April of the COVID-19 pandemic year 2020, which brought record-breaking turnovers on the Moscow Exchange as well.
Geopolitical risks began to mount after a New Times story alleging preparations to evacuate the Russian embassy staff from Ukraine. Moreover, the media reported joint exercises of Russian and Belarusian military contingents. These exercises were planned last year but the nervous situation on the stock market only aggravated against the background of such publications.
“In fact, our stock market collapsed back in October last year,” State Duma deputy Mikhail Delyagin, academic director of the Institute of Globalization Problems, Doctor of Sciences (economics), told wek.ru. “Now all of us are observing the continuation of this decline. Well, this is the general weakness and extra vulnerability of our stock market.”
According to Delyagin, geopolitical risks are not the only factor behind the Russian stock market crash, though “these risks certainly exist.” Let's remember that 80% of our stock market is owned by “the British and Americans,” he reminded. So, this can be just an element of pressure on the Russian authorities in connection with this entire political situation. They were told to sell, so they are selling, said Delyagin.
The day before, NATO representatives proposed that Russia should continue negotiations in the near future and coordinate the plans for meetings between the foreign ministers of Russia and the United States. According to market players, these intentions “inspire some hope” that some kind of compromise may be reached.
The Moscow Stock Exchange reported that as of 12:00 on January 19, the Russian stock market had gained 3% after a significant fall in morning trading. The Moscow Exchange Index climbed above 3,400. The ruble index of the Moscow Exchange was up 3.21% to 3,435.69 points and the dollar RTS Index was up 2.92% to 1,407.32 points by 11:30 a.m. As for the dollar rate for “tomorrow,” it's decreasing by 1 kopeck to 76.9 rubles, while the euro is growing by six kopecks to 87.17 rubles. What will be the future forecasts?
“As for possible forecasts, there cannot be any today,” Delyagin said. “We know what's going on in Ukraine right now. What if it attacks us tomorrow or the day after tomorrow? Russia will still be guilty anyway. So, what will happen to the stock market then? Of course, it will fall.”
If everything is quiet and nothing happens, with the price of oil at $85 per barrel, our stock market will start to grow again, Delyagin said in conclusion.