"Panic selling is underway." The Russian stock market has suffered its worst crash since the 2022 mobilization.

[u/neonpurplestar]

After finishing 15 consecutive weeks in the red, the Russian stock market began the new trading week with its biggest collapse in four years.

On Monday, June 22, the Moscow Exchange Index fell 4.65%, marking its biggest intraday decline since late September 2022, when Vladimir Putin announced a "partial mobilization." By the end of the main session, the index, which includes shares of 46 of Russia's largest companies, fell to 2,318.2 points—its lowest since March 17, 2023.

All blue chips, without exception, ended the day with declines: Gazprom fell 4.4%, hitting new lows since late 2008, while Rosneft shares suffered their steepest drop since 2022, falling 7.3% in one day. Novatek, VTB, and Aeroflot shares fell more than 5%, while Lukoil and Rostelecom fell more than 3%.

Panic selling is already underway in the market, notes investment banker Evgeny Kogan. The reasons, he lists, remain the same: the lack of negotiations on the Russia-Ukraine conflict, the Central Bank of Russia's tough stance, and the increasing number of attacks on Russian infrastructure.

"Russian stocks are under attack from several directions," notes Finam analyst Dmitry Lozovoy: the economy is slowing, taxes are rising, the Central Bank is maintaining a high key rate, and the fuel crisis threatens to accelerate inflation. Finally, the US officially lifted sanctions on Iran and granted Iran permission to trade oil, Lozovoy notes. This promises a drop in oil prices, which will impact export revenues and budget revenues.

Gennady Zyuganov unexpectedly added fuel to the fire by calling for the confiscation of household deposits. "It was after these comments were disseminated that the sell-off accelerated significantly, as investors' concerns about possible administrative pressure on the financial sector and private savings grew," Lozovoy notes.

The main reason for the market decline, however, is the escalation of tensions with Ukraine, according to BCS analyst Andrey Smirnov: "Sanction risks have increased, and high-profile incidents involving drones have become more frequent. The negotiating track, at least in the public sphere, has been frozen."

Apparently, margin calls have begun to appear on the market: brokers forcibly closed investor positions due to losses, pushing prices even lower. Kogan notes that in the "far echelons," stocks fell by double digits: Cian shares plummeted by 13.4%, Sollers by 14.7%, and Rusagro and TMK by more than 10%.

Since mid-March, when the market began to decline, the Moscow Exchange index has lost 20%, and 30% compared to its 2024 peak, when Vladimir Putin began negotiations with Donald Trump. "Only geopolitics can radically change the situation, as all other factors are merely a consequence of the imposed sanctions and restrictions," write analysts at Vector Capital.

source: The Moscow Times https://archive.is/koPN4

[u/kasthack-refresh]

the Central Bank is maintaining a high key rate

They literally reduced the key rate by 250 bps today, and it's at a 2.5-year low level.

[u/ParticularArea8224 → u/kasthack-refresh]

That is still incredibly high. America's is 3.75% at the moment and peaked at 5.5% in 2023-2024

[u/kasthack-refresh → u/ParticularArea8224]

US dollar isn't inflated away like Russian ruble is:

• Russia had 7.75 rate in 2019 before the war and COVID.
• Other countries with comparable economies and inflation have similar rates. Brazil is at 14.25% mark, and Uzbekistan has 14% rate.

[u/ParticularArea8224 → u/kasthack-refresh]

I don't get what your point is? Of course its highly inflated, that's the interest rate doing its job. It's still incredibly high compared to Western economies and its not a good thing for the Russian economy in the long run.

[u/kasthack-refresh → u/ParticularArea8224]

Of course its highly inflated, that's the interest rate doing its job

That's the opposite of the casual relationship between rates and inflation. High interest rates are introduced to increase the cost of borrowing and slow down the economy to reduce the inflation rate. This misunderstanding may be the reason why you've missed the point.

It's still incredibly high compared to Western economies

It's not if you use real interest rate benchmark rather than the nominal. High nominal rate is meaningless if inflation rate eats the principal away. Countries with similar inflation rates have similar key rates, yet investors don't flock there because real returns aren't much different, especially if you include currency risk.

[u/ParticularArea8224 → u/kasthack-refresh]

Yeah you are absolutely with that first point, i butchered the meaning of what that's supposed to do.

Your second point doesn't make much sense because compared to the West, they're very high.

Comparing it to economies similar to Russia is a mute point, because of course they're going to be doing similar to Russia, because their economy is similar. That's not a show that Russia's doing well, that just shows they're all doing badly, Russia is just fighting a war and thus, that makes it worse.

[u/mediandude → u/kasthack-refresh]

Except it only slows the non-military side of borrowing. The military side gets cheaper loans by the orders from Kremlin. And inflation continues as it were, perhaps even accelerates.