Shares swelled from petrodollars – Newspaper Kommersant No. 58 (7503) of 04/05/2023

The Moscow Exchange Index has updated its annual maximum, rising above the level of 2500 points. Investor optimism is supported by rising oil prices and the strengthening of the dollar in Russia, which has a positive effect on the financial performance of export-oriented companies. Moreover, the volume of trading has also grown, as well as transactions with the shares of Gazprom and VTB, which until recently lagged far behind the leader represented by Sberbank. Experts believe that the market will be able to gain a foothold above the level of 2500 points and even grow to 2800 points, but subject to the preservation of the current information background.

On April 4, the Moscow Exchange Index rose above the level of 2500 points for the first time since April last year. During trading, it grew by 1.5%, to the level of 2511.49 points, the maximum since April 14, 2022. Even with the correction in the afternoon (the index closed at 2480.45 points), it gained almost 10% in two and a half weeks.

Trades were held at high activity of investors. The volume of trading in shares included in the calculation of the Moscow Exchange index exceeded 61 billion rubles, which is 27% higher than on Monday.

The current market movement occurred against the backdrop of rising oil prices after the decision of the OPEC+ countries to further reduce the production of raw materials (see. “Kommersant” dated April 4).

North Sea spot oil hit $86.37 a barrel on Tuesday, up 1.4% from Monday’s close and up 7.6% from the end of last week, according to Investing.com.

“The price of the nearest futures for Brent has returned to the levels of early March, it is possible that maintaining a high level of prices will also contribute to reducing the discount on Russian oil, which will positively affect the income of Russian exporters,” said Mikhail Bespalov, an analyst at KSP Capital Asset Management.

The effect of rising oil prices on the stock market was reinforced by the weakness of the ruble exchange rate, as it leads to an increase in the profitability of export-oriented companies. On Tuesday, the dollar exchange rate on the Moscow Exchange reached its highest level since April 19 last year, 79.6 rubles/$, and at the end of trading amounted to 79.52 rubles/$. This is for 78 kopecks. higher than Monday’s closing values ​​and by almost 2 rubles at the end of last week.

The current weakening of the ruble, according to the chief analyst of PSB Denis Popov, is associated with local imbalances in supply and demand for currency. “The reason may be an increased demand for currency from a major market participant or a temporary weakening of the inflow of export earnings,” he notes.

Against the general background, the shares of VTB and Gazprom stood out, during the day their quotes rose by 5% and 3.2%, and by the end of the day they stopped at 0.6% and 1% higher than Monday’s closing values. At the same time, trading volumes turned out to be higher than those of Sberbank, although earlier they were several times inferior to them. According to the Moscow Exchange, the volume of trading in VTB shares exceeded 9 billion rubles, Gazprom – 12 billion rubles.

According to Konstantin Asaturov, Managing Director of Sistema Capital’s equity department, VTB’s shares were positively affected by management’s comments about the bank’s record profits in the first quarter of 2023, which increases the likelihood of generous dividend payments. “The gas company’s shares are still among the underdogs since the beginning of the year, and their latest movement is more likely due to technical growth following the broad market,” he said.

If the “favorable external and internal background” persists, the market growth may continue, but not immediately.

According to Trinfico portfolio manager Yuri Grossman, the level of 2,500 points may turn out to be a significant resistance level for the Moscow Exchange index, so the index is highly likely to correct several times even in the presence of a positive conjuncture. “If the banking crisis in Europe and the US does not develop into a global recession, we may see the index increase over the next six months to 2600-2800 points,” he said.

However, geopolitical factors limit the dynamics. “We saw how the announcement of partial mobilization in September last year affected the market,” emphasizes Mikhail Bespalov. He allows for an increase in volatility “in the event of an escalation of the situation or the announcement of new sanctions that are significant for the economy.”

Vitaly Gaidaev