Market rebound: why the Moscow Exchange index rose to a maximum in five months

On Tuesday, July 28, the Russian securities market showed a record growth. At the beginning of trading, the Moscow Exchange index rose 0.8% and for the first time since February 27 reached the level of 2907 points. After a sharp rise, the indicator slightly corrected to 2880 points, but at the same time it remains close to the maximum level over the past five months.

At the end of winter, the key indicator of the Russian stock market was above 3100 points. However, in early spring, the spread of the coronavirus provoked panic among global investors, and traders began to massively sell securities on global markets. The situation had a negative impact on the value of Russian shares, as a result of which by mid-March the Mosbirzh index renewed its two-year low and dropped below 2,100 points.

However, with the weakening of quarantine restrictions and the introduction of anti-crisis measures in a number of countries, there has been a recovery in the global stock market. Against this background, since the end of March, the Moscow Exchange index has grown by almost 1.5 times and has now recovered by more than 90% from the level before the pandemic. The chief analyst of TeleTrade Mark Goykhman spoke about this in an interview with RT.

“The Russian securities market has traditionally been in line with world stock indices, and its dynamics depend on the general risk appetite of investors. After a sharp collapse in March, stock quotes on global exchanges received unprecedented assistance from world central banks. Regulators from different countries, primarily the US Federal Reserve, have launched programs to stimulate their economies, and investors' appetite for risky assets has grown, ”Goikhman explained.

According to him, the recovery of world oil prices provided additional support for Russian shares. So, in April, the coronavirus pandemic triggered a record collapse in global demand for hydrocarbons, which led to a fall in the cost of Brent crude energy below $ 16 per barrel. Meanwhile, today oil consumption in the world has begun to grow gradually, and quotations have reached $ 43-44 per barrel.

“Shares of Russian companies in the fuel and energy sector occupy up to 48% in the structure of the Moscow Exchange index. At the same time, to date, oil quotations have almost tripled from the April lows. This supported domestic blue chips (shares of the largest and most reliable companies. -  RT ) on the stock exchange, "added Mark Goykhman.

As the expert of the Academy of Finance and Investment Management Ilya Zaporozhsky told RT, the rise in the price of shares of metal mining companies also played in favor of the national stock market. The analyst associates such dynamics with a sharp increase in the cost of precious and industrial metals.

Note that at the auction on Tuesday, world gold prices reached their maximum for the entire observation period - $ 1974 per troy ounce, and silver quotes for the first time since April 2013 exceeded $ 26. At the same time, the cost of copper in recent days has come close to $ 3 per pound and is trading at a record level since April 2019. This is evidenced by data from the Comex Commodity Exchange.

At the same time, one of the main reasons for the confident recovery of the Russian stock market was the sharp inflow of private investors to the Moscow Exchange. Denis Ikonnikov, portfolio manager of QBF investment company, told RT about this. According to him, from January to June 2020, the number of players on the trading platform increased by 1.5 million people. To a large extent, the analyst explains this by the actions of the Bank of Russia.

“The fact is that since the beginning of the year, the Central Bank has lowered the key rate from 6.25% per annum to the lowest level in the history of Russia - 4.25%. In this regard, by the end of the year, the average maximum rates on deposits in rubles for the top 10 banks may drop to 4% per annum and below. As a result, Russians are increasingly paying attention to the domestic stock market, where in the first half of the year the average dividend yield of securities exceeded 6%, "Ikonnikov explained.

According to the Moscow Exchange, in the first five months of 2020, the volume of transactions of individuals on the trading floor increased 2.5 times compared to the same period in 2019 and reached 7.9 trillion rubles. At the same time, in April, the share of private investors in the trading volume became the maximum for the entire observation period and amounted to 47%.

According to Denis Ikonnikov, under the current conditions the Mosbirzh index may in the near future overcome the psychological mark of 3000 points. However, the further dynamics of the indicator will largely depend on the situation with the pandemic and the pace of recovery of the global and Russian economies, the analyst concluded.