News: Ruble rally and falling oil choke stocks – Expert

The ruble continued its steady growth today, ignoring both the oil that fell by 5% and the upcoming new sanctions. By the end of trading on the Moscow Exchange, the Russian currency grew against the dollar by more than 2%, the dollar cost about 57.5 rubles. At the moment, the quotes of the “American” fell to the mirror mark of 56.65 rubles.

The volume of dollar trading on the Moscow Exchange today has grown by more than half compared to the average of last week. This is due both to the peak of the tax period and the activation of speculators, who, it seems, mainly began to play for the strengthening of the ruble after the dollar-ruble pair broke down the one and a half month side channel 60-61.

“The base strength of the Russian currency comes from the impressive surplus of the balance of payments of the Russian Federation,” Alexander Bakhtin, an investment strategist at BCS Mir Investments, told Expert. “At the same time, the actualization of geopolitical risk, paradoxically, in the current conditions only strengthens the trend towards voluntary devaluation in the economy. In light of the latest news, many investors are wary of being in a non-cash currency.”

Andrey Maslov, an analyst at FG Finam, also mentioned the presence of such fears on the market, noting that “the confidence of the ruble can also be maintained by the fact that large exporting companies that are going to pay dividends must additionally convert significant amounts of foreign currency into rubles in order to generate the necessary volume of ruble liquidity for payments to its shareholders”.

It is possible that at the beginning of next week the Russian currency will continue to grow and reach 55 rubles. per dollar, which technical analysts call the goal of the current phase of the strengthening of the ruble.

The fall in oil prices, the appreciation of the ruble and new sanctions risks have become the reasons for large-scale sales of Russian shares today. By the close of trading, the Moscow Exchange Index was losing about 4.5%. Over the week, the indicator fell by 14%.

Worse than the market were ferrous metallurgy, for which the ruble exchange rate is a very important part of the business. Some analysts have considered that now it is profitable to export steel products at a rate of the Russian currency of about 70 rubles. per dollar. Here, by the way, a completely logical question arises: how did the metallurgists prosper and pay generous dividends in those years when the dollar costs just over 33 rubles?

A couple of weeks ago, the securities of the sector began to be carefully selected in anticipation that the closure of metallurgical production in Europe and the introduction of a budget rule that weakens the ruble will improve the situation with sales for the export of ferrous metals. However, after the Ministry of Finance announced that there were no intentions to introduce a budget rule even next year, one should not expect a strong depreciation of the ruble, which affected the assessment of the prospects for the growth of shares of ferrous metallurgists.

Gazprom closed the day with losses of about 3%. The paper is still supported by the expectation of dividends, and according to the results of the five-day period, the shares of the gas monopoly were twice as good as the market, having decreased by 7.7%.

Lukoil sold even less today (-2.5%), from which dividend payments are also expected. According to some estimates, the dividend yield on the company’s shares at current prices could be about 20%, which is comparable to Gazprom’s dividend yield. Weekly losses in Lukoil’s capitalization are estimated at 13%, which is comparable to the decline in the market as a whole.

The dynamics of the stock market next week remains uncertain. There are expectations related to the external environment, namely the fact that stock America will start a long overdue rebound. In addition, today oil has reached the technical target of $85/bbl decline and may also bounce higher. However, ceteris paribus, the significance of these two is difficult to assess, and they are hypothetical in nature.

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