The value of Russian stocks is experiencing a significant decline in prices; Where it reached very low levels, as it was a decade ago, when it started financial measures according to which it reduced foreign debts and established foreign currency reserves.
Will this time be repeated again because of the political crisis on the Ukrainian border?
The Financial Times published a report on the economic opportunities that are currently available due to the decline in the value of Russian stocks, and the possibility of them being very profitable deals, whether for individuals or international companies.
The report confirms that there is a massive decrease in the value of Russian assets owned internationally, which paves the way for profitable deals in the event of purchase at this time.
The data of the international stock market indices indicate that there are companies with billions of dollars that have very good returns and profits, some of which reach 40%, and their shares seem really cheap, in addition to that these profits will rise more if oil prices continue to rise.
And if you simply review the chart of the Russian stock index MOEX against the price of crude oil in rubles, you will easily find data that confirms this.
The oil-based economy is now particularly attractive, given rising global inflation, and the Russian economy in particular, given Russia’s very tight monetary policy.
And here comes the most important question: Can Russian stocks fall more than that?
To answer this question, the question must be divided into two parts:
The first: What is the chance that the situation on the border will turn into even greater chaos?
Second: How will this chaos affect the stock price?
Whoever objects to the first part of the question believes that Moscow is really interested in its security, and has no domestic support or geostrategic interests in annexing Ukrainian territory.
If the United States and NATO calm things down, offer guarantees about missiles, and slow down the expansionist aspirations of the alliance, that would reduce escalation.
A second possibility confirms this scenario; is that even if things go wrong, financial sanctions against Russia are likely to be too weak to threaten its economy, unless they prevent the country from selling its oil and gas abroad; Which would hurt Europe as much or perhaps more than Russia.
What do the financial experts think?
Jacob Grabingisser manages a $4 billion investment portfolio in Eastern European stocks. If we’re talking about a worst-case scenario, there are two possibilities.
First possibility: It is the invasion of Ukraine, as Russian tanks cross the border and seize a large area of Ukrainian territory.
This is highly unlikely. There is no support for such a step among the Russian people.
There has been support for the annexation of Crimea in the past, but it has not. Among my friends in Russia, about 10% to 15% have Ukrainian passports, there are a lot of friendly ties, and they are like Norway and Sweden; So I’m going to rule out that possibility.
Second possibility: It is the fabrication of an accident, for example, someone launches 20 missiles, and then things get out of control and it becomes difficult to undo them.
Also, I do not think that it is likely to happen, and Putin can stop such a development. This is an unlikely scenario, but it represents a danger.
The most likely scenario is a slow de-escalation.
Russia and the United States can reach some kind of agreement that perhaps no missiles will be placed in Ukraine, and Ukraine’s NATO membership is not off the table at the moment.
The agreement may not be public, but it will satisfy Russia.
It is useful to remember that Russian banks have more dollar cash assets than outstanding dollar debt, and there is a dollar surplus.
From a balance sheet perspective, Russia has enough reserves to handle just about anything and remain solvent.
if financial penalties occur; It will not be economically efficient. A shutdown of SWIFT – the global system for interbank payments – would cause total paralysis, but ultimately it could be bypassed.
Russia does not have much external need for dollars except for oil and gas, which it can sell to China or price in other currencies. But imposing sanctions on Russian oil and gas is a suicidal option for Europe.
And one of the biggest and most important questions here to answer is will foreign investors continue to be able to own Russian assets?
Even if the answer is “no,” this does not matter much from an economic point of view for Russia or most Russian assets, because foreign ownership of Russian assets is negligible in relation to GDP.
Even if secondary trading of Russian assets is banned for international investors, Becker said, the impact of prices is likely not to be disastrous, given the drop in international ownership. But if things calm down at the border, one can make a lot of money in Russia.
