The Russian stock market did not fit into the new political and economic conditions

So, during a press conference at the DOS, Vasily Koltashov, head of the Center for Political and Economic Studies of the Institute for a New Society, explained another record drop in the Moscow Exchange index, which occurred the day before.

By the close of the main session on September 20, the Moscow Exchange index fell by 8.84%. Shares of the largest Russian companies fell in price at once. Experts note that such a sharp drop is comparable to what was observed on February 24, 2022, as well as in 2014.

This fall, according to Vasily Koltashov, indicates that “the old Russian stock market is dying”:

“It’s tragic, it’s very sad because a lot of people have lost money on this. The problems that arose are partly explained by the fact that these were to a large extent not Russian companies or companies that were not entirely oriented towards working in the Russian market, and certainly not ready to fit into the new political and economic conditions that have arisen in the world. So the tragedy here is multidimensional, and the last market drop that happened does not mean anything here. The first major market drop that heralded its death came in November of last year when we saw a decline in oil prices that was a signal drop. What happened after February 24th was just a crash.”

The “disappointing diagnosis” made by Vasily Koltashov was supported by another participant in the press conference, HSE Professor Igor Lipsits:

“In fact, these are some paroxysms of a dying organism: the market fell, then it rises a little, then it will flutter again. The Russian stock market is dying, and it is clear why this is happening: after all, the stock market is a means of investing money for those who have it in the form of savings in order to grow this money. And now it is pointless to do this in Russia (since now you are more likely to lose than earn on Russian securities. – S.I.). And the second huge role of the stock market is that it is a mechanism for investment in the economy between industries. This is also unrealistic now, because the structure of the economy will be determined by the state, and the stock market can do little here.”

However, as far as future prospects are concerned, the opinions of the press conference participants differed. So, according to the forecast of Igor Lipsits, even if the Russian stock market somehow exists, there will not be much point in investing in it, and there are no special prospects for its revival either. In turn, Vasily Koltashov pointed to a specific factor in the possible growth of the Russian securities index:

“This is the fall of the Kyiv regime, the complete liberation of Ukraine and the redistribution of property there on a huge scale. This can suddenly give meaning to the activities of a number of companies. For example, if Gazprom receives the entire gas transportation system, this will raise shares, and Rosneft will receive the property of Ukrtransnafta JSC. Also, growth factors may be the inclusion of new lands or the merger of metallurgical companies and their receipt of large contracts for the production of rolled metal for large-scale restoration work in the infrastructure of the liberated territories.”

However, as Professor Igor Lipsits objected to his opponent, one should not count on the fact that the accession of new territories will have a positive effect on the Russian economy, which is going through difficult times. In his opinion, these territories, on the contrary, can become a burden for it, since they will have to invest huge sums in them to restore the economy and support the population.

Sergei Ishkov.

Photo by Alexander Avilov / Moskva Agency