It is not only the German parquet that is celebrating. Russian investors can also expect significant price increases. At 3,471 points, the MOEX index was higher than it has ever been since Russia invaded Ukraine.

This trading year alone, the index has already gained 11.75 percent and more than 45 percent in the last twelve months, as Bloomberg data shows. This is three times more than the leading German Dax index., which is also currently chasing records. From a low of around 1,950 points in October 2022, MOEX has even gained a good 78 percent. Three factors in particular influence this development.

Factor 1: The economy is strong

The seemingly main reason for the stock market boom: the Russian economy is performing better than expected. This is confirmed by the growth forecasts of the International Monetary Fund (IMF). According to January projections, gross domestic product is expected to rise 2.6 percent this year.

This is 0.4 percentage points less than in October. However, Russia would surpass the United States and even grow five times faster than Germany. According to the IMF, the Russian economy shrank by 1.2 percent during the first year of the war, while the German economy grew by 1.8 percent at that time.

But things improved again in 2023, especially as the industry was increasingly adapting to the war economy. Officially, it even rose by a whopping 3.6 percent. These figures could be improved, but still, the IMF forecasts show that things are not really bad for the Russian economy.

Factor 2: Investors can't do anything else

Furthermore, the good price development is due to the fact that Russian investors cannot do anything else. Western sanctions not only prevent wealthy Russians, in particular, from taking their money out of the country. On the other hand, the Kremlin encourages its own people to leave money in the country.

Western investors, in turn, have little chance of withdrawing money invested in Russian stocks and causing prices to fall. The Kremlin simply banned it. Since March 2022, interest, dividends and refunds from investors from “hostile” countries end up in the so-called “C accounts”.

Meanwhile, investors still had the possibility of selling these accounts to third-country intermediaries, at painful discounts. But President Vladimir Putin also made this trade more difficult last year. It is not known how much money remains idle in those “C accounts.” According to Bloomberg, for example, Citigroup reported in January that it was in possession of $4.7 billion in “non-transferable Russian corporate dividends.”

Factor 3: The weakness of the ruble

Recently, the weakness of the Russian ruble is also affecting that country's markets. Recently, one euro was worth just under 100 rubles, almost double what it was in mid-2022. On the one hand, this means that imports are becoming more and more expensive for Russian citizens.

On the contrary, the ruble facilitates exports by Russian companies. In particular, that country's strong oil and commodities industry, with companies such as Gazprom, Rosneft and Lukoil, benefits from this favorable exchange rate because they conduct business in foreign currencies and the price of oil is currently back in the mark of 100 dollars per barrel. This also increases the attractiveness for Russian savers to invest in domestic stocks instead of accounts and to collect the sometimes generous dividends from commodity giants.

“Driven by speculative and manipulative elements”

In this context, the rally in Russian stocks should not be exaggerated. Other indicators such as the RTSI, which unlike MOEX is not calculated in rubles, have recovered much less clearly from the nadir at the beginning of the war. And MOEX itself was still trading at over 4,200 points in the fall of 2021, months before the war, significantly higher than before.

Investments are out of the question, at least for Western investors. “The Russian stock market is unlikely to correctly reflect the development of the national economy and is rather driven by speculative and manipulative elements,” stock market expert Michael Reuss, CEO of HRK Lunis AG, tells FOCUS online.

As trading of Russian securities on international exchanges is no longer possible due to EU sanctions, investors would have to trade directly in Moscow and store the securities there, Reuss continued. And this “is not advisable due to the uncertain legal situation.”

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