There is nothing on the Moscow stock exchange to indicate that the worst corona wave since the outbreak of the pandemic is currently raging in Russia.

On the contrary: The ruble-denominated leading index Moex topped the 4,000 point mark for the first time in its history;

since the beginning of the year it has gained a good 27 percent.

Katharina Wagner

Business correspondent for Russia and the CIS based in Moscow.

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At the beginning of the pandemic, in spring 2020, it was different, when prices collapsed in Moscow as well. But because an initial, hard lockdown with curfews was not followed by any further measures for a long time and the pandemic was largely given free rein, the Russian economy recovered very quickly as a result of the global upturn. For the Russian benchmark indices, in which oil and gas companies are heavily weighted, global commodity prices play a particularly important role, the record increase of which this year also boosted the Moex and its dollar equivalent, the RTS index: The RTS-Index has increased by almost 34 percent since the beginning of the year.

Investors also returned to the Moscow Stock Exchange because their traditionally great fear of new sanctions has recently receded into the background and the Russian stock market, with its stable currency, a relatively comfortable debt burden for issuers and high dividend yields, is particularly attractive at times like these when there is a lot of cheap money in circulation.

Russia is back on the stock exchange

The upswing in the Moscow indices, after years of reluctance, prompted a number of Russian companies to go public, both in Moscow and abroad. The Russian IT company Softline has just completed its IPO in London; in the first half of this year the Segezha wood processing group and the private hospital chain EMC went public in Moscow; The discount store Fix Price chose the double valuation in London and Moscow: With proceeds of almost 2 billion dollars, the IPO of the cheap supermarket chain was the largest since the Western sanctions against Russia for aggression against Ukraine in 2014.

Since then there had been only a few Russian IPOs; in 2018, for example, not a single one. In October of last year, the state shipping company Sowkomflot, for the first time in three years, dared a major IPO; The online retailer Ozon soon followed on the New York Nasdaq. A number of other companies are now planning their debut, including the car sharing company Delimobil, the property search platform Cian and the grocer Wkuswill.

At the moment, it is not only oil and gas companies that benefit from the Moscow Stock Exchange, but also banks.

The shares of the parent company of the successful online bank Tinkoff have gained almost 220 percent in value since the beginning of the year, those of VTB-Bank by a good 41 percent.

The higher income from exports thanks to rising commodity prices improved the "already solid" financial and economic framework values ​​of Russia, said Dmitrij Babin, an analyst at the investment company BKS Mir Investizii, the Kommersant newspaper.

This strengthens consumer and business activity, which in turn increases banks' profits.

New corona measures are slowing down recovery

In addition, however, the financial institutions are being supported by a tightening of monetary policy by the Russian central bank: in mid-October, contrary to expectations, the regulator surprisingly raised the key interest rate by 0.75 percentage points to 7.5 percent. Shortly before, President Vladimir Putin had ordered clear restrictions for the first time since spring 2020 in view of new records for corona infections and deaths; Most shops are closed this week, restaurants and cafes are only allowed to offer take-away meals, and many employees are on special leave that companies have to pay.

Many analysts had expected the central bank to be more cautious because of the economic impact of these new measures, the recovery of which had recently slowed anyway. Central bank chief Elwira Nabiullina explained her approach with the sustained inflation, which according to the regulator's estimate this year will be between 7.4 and 7.9 percent on average and thus well above the target value of around 4 percent, while the economy is down 4 to 4.5 percent should grow. In the eyes of the central bank, the corona measures are also driving up prices, since demand hardly falls as a result, but production is slowed down due to plant closings.

For the stock market beyond the banks, Nabiullina's decision is a bad signal: The Moex index fell last week, but is still well above 4000 points.

One of the reasons for the weakness shown last is the rise in interest rates as a result of the central bank's decision, as this would make corporate bonds more attractive than stocks, wrote Wassilij Karpunin, analyst at the investment company BKS Express, on Monday.

Nevertheless, many analysts assume that the Russian stock market will still benefit from the high commodity prices and the loose monetary policy of western central banks, at least in the next few months.