The MOEX index has plunged this year as most of its companies remained in the red and the Russian ruble slipped. The index, which tracks the biggest 50 companies in Russia, was trading at RUB 180, down by over 30% from its highest point this year. It has become one of the worst-performing indices.
Why Russian stocks plunged
The MOEX index has continued to plunge as woes in the Russian economy continues. A key concern for the economy is that the price of crude oil and natural gas has dropped sharply this year
Brent has dropped to $70, while the West Texas Intermediate (WTI) moved to $67. Russia’s ural benchmark is trading at a much lower price, affecting the amount of money the government is receiving.
Most companies in the MOEX index are exposed to the energy sector. Indeed, most of the biggest ones like Rosneft, Lukoil, and Gazprom are the biggest players in the oil and gas industry. The same is true with the biggest Russian banks.
The MOEX index has also dropped because of the weakening Russian ruble. The USD/RUB was trading at 103.20, up from 86 in January.
A weaker ruble has led to higher inflation rate. Recent data showed that inflation has remained above 9% this year and analysts expect that it will cap the year at about 10%.
This inflation has pushed the central bank to hike interest rates sharply. Economists expect that the central bank will hike rates from 21% to 23% on Friday this week.
These rate hikes have led to movement from stocks to the bond market. With interest rates above 20%, and with inflation at 9%, it means that one can generate a 10% inflation-adjusted return by just buying Russian bonds.
Most MOEX companies have plunged
The MOEX index has plunged as most companies have fallen. Just four out of 50 companies in the index have rallied this year.
Aeroflot, a leading airline company in Russia, has jumped by 43% in 2024. This rally is in line with other global airline companies like United Airlines and IAG that have soared by double digits.
Polyus is another MOEX index company that has surged this year. It rose by over 24% because of the rising gold prices. Gold surged to a record high, helped by the rising demand from individuals and central banks.
Yandex, Russia’s answer to Google, has also done well this year as it jumped by over 31%. This rally happened after the company sold its Russian business in a $5.4 billion deal.
The other companies that have had some small gains are Moskovskiy Kreditnyi Bank and Surgutneftegas, a leading Russian gas company.
All the other companies in the MOEX index have slumped this year, with VK, a leading social media network, being the worst performer. It has crashed by over 55% this year. The other top laggards are companies like PIK SHb, Transneft, Severstal, Novatek, Magnit, and AFK Sistema. All these firms have crashed by over 40%.
MOEX index analysis
The daily chart shows that the MOEX index peaked at 253 RUB earlier this year and it then imploded to a low of 169 RUB. It has moved below the 38.2% Fibonacci Retracement level and even formed a death cross as the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. A death cross is one of the most bearish patterns in the market.
The MOEX index’s Relative Strength Index (RSI) and the MACD have pointed downwards. Therefore, the path of the least resistance for the index is downwards, with the next point to watch being at RUB 150.
The post Russia’s MOEX index has crashed, with 90% of stocks in the red appeared first on Invezz
