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Rising Oil Prices Boost Russian Economy

Rising Oil Prices Boost Russian Economy

Russia, the global leader in energy exports, attracted renewed investment to its stocks this week as oil prices made considerable gains.

Hong Kong, July 01, 2016 — The Moscow Exchange Index (MICEX), which tracks the 50 most liquid stocks on the Russian exchange, gained 1.3 percent yesterday, only a few percent short of a record close after a 7 day decline previously.

The main oil producers in the region such as, Lukoil, Rosneft and Brent saw their stocks jump by more than 2 percent as crude rose to over $45 a barrel.

“There is generally a favourable investor sentiment towards Russia at the moment and these bumps in crude prices are not hurting their stocks either” said Gary Chambers, Chief Investment Officer and Director of Corporate Trading at Fidea Wealth Management via phone interview. “Moscow has clearly decided to halt the oil selloff after the recent gains of the currency” he added.

The ruble has been outperforming its peers of late, gaining 0.5 percent against the greenback and Russian stocks are rallying after production curbs in the United States relaxed. The nation’s government bonds soared, forcing yields down to just over 9 percent, second only to Brazil this year.

Russia’s economy is heavily dependent on its energy exports which account for almost two thirds of the country’s total international trade. Oil and gas business brings in about 30% of budget revenue for the global economic giant.

The Ministry of Finance recently offloaded 9 billion rubles of fixed-coupon OFZ bonds in early sessions today and it will offer 19 billion rubles of fixed-rate notes later, which are due in fall 2021.

Vectors ETFs from the seasoned investment management firm VanEck slumped with a $39 million dollar outflow last week according to a report from business news agency Bloomberg. The flagship investment fund lost nearly $70 million in a week.

Kazuko Rei
Fidea Wealth Management
Tokyo, Japan

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