“Foreigners Flee from Russia”

The Bank of Russia published on Wednesday new data on the nominal volume of federal loan bonds (OFZs) owned by non-residents and the share of non-residents on the market.

As of July 1, 2018, the volume of the OFZ market amounted to 7,033 trillion rubles. This is a record figure from 2012. Non-residents had bonds with a face value of 1.982 trillion rubles, their share was 28.2%. And this is the lowest figure since April last year.

The share of non-residents reached the maximum size (34.5%) on April 1 of this year. In the ownership of foreign investors there were bonds with a nominal volume of 2.351 trillion rubles. Thus, from April 1 to July 1, non-residents sold OFZs for 369 billion rubles. (about $ 6 billion). But on April 6, the US imposed sanctions on another group of Russian businessmen and companies. Under the restrictive measures were, in particular, Oleg Deripaska and his assets “Rusal” and En +, as well as Viktor Vekselberg and his holding company “Renova”.

This step by the US authorities triggered the start of mass withdrawal of foreigners from the Russian debt and stock market. In addition, the ruble lost almost 9% against the dollar. The Russian currency could not resist even in the situation when oil quotes hold above $ 70 per barrel.

In recent months, the stock market has been living by the expectations of new sanctions. During periods of weakening of negative rhetoric from Washington, the Mossbirge index takes new heights, but then there is a significant correction

Investors had high hopes for the meeting of Donald Trump and Vladimir Putin, but all the positive statements made by the leaders of the United States and Russia after the talks were subsequently disavowed by the American side.

“Last week was one of the most unsuccessful for the Russian stock market over the past couple of months. The MICEX index fell immediately by 4.2% to 2,247.82 points after the update of the historical maximum of 2379 points a week earlier. In fact, the growth of the Russian market was a partial advance on the eve of negotiations between Trump and Putin, disappointment from which changed the mood in the market. All the positive statements by Trump have been reversed in a day, which is becoming a tradition, “says Vladimir Vedeneev, head of investment management at Raiffeisen Capital.

Then news came from Washington about the new sanctions against the Russian Federation, which further exacerbated the situation on the Russian stock market, he said.

Fears that the United States will impose new sanctions on Russia, more and more. The head of the White House, Donald Trump, said that, in his opinion, the Kremlin is ready to intervene in the forthcoming elections this year to the House of Representatives and the US Senate on the side of the Democrats.

“I am very concerned that Russia will make every effort to influence the upcoming elections. Since no other president as I show such rigidity towards Russia, they will do their best to push the Democrats. They do not exactly want Trump! “, He wrote on twitter on June 24.

“Everything spoke in favor of continuing the rebound of ruble assets in value after losses suffered last week, until yesterday, Donald Trump decided to write on Twitter,” – said analyst “Alor Broker” Alexei Antonov.

After this statement, the dollar and euro rates jumped almost to ruble, and trading on the exchange on Wednesday opened with a new fall.

The problems were added by American senators Lindsey Graham and Bob Menendez. They announced that they will submit a bipartisan bill on strengthening sanctions against Russia, which will be aimed at the national debt, as well as energy and financial sectors, reports Bloomberg.

“In the coming days we will submit a comprehensive bill to ensure the introduction of mandatory sanctions within the framework of CAATSA (the law” On Countering America’s Opponents through Sanctions “-” Gazeta.Ru “), while imposing additional sanctions to ensure maximum influence on the Kremlin’s campaign against our democracy and against the rule-based world order, “the senators said in a joint statement.

As noted by Bloomberg, Senators Marco Rubio and Chris Van Hollen insist on voting on a separate bill that will impose sanctions, including on debt transactions, for countries interfering in elections.

At 15:00 Moscow time on July 25, the dollar was worth 62.9 rubles, the euro – 73.6 rubles. The Mosbirzhi index fell by 0.05% to 2277 points. The market is not much helped by the positive news about the growth in oil prices and that “Rusal” has submitted to the US Treasury a plan to lift sanctions. The head of the department, Stephen Mnuchin, stated that the US authorities do not have the goal to get the company out of the market.

It is worth noting that all these sanctions problems are superimposed on the general trend of strengthening the dollar and increasing the yield of US assets. This is due to the normalization of monetary policy by the US Federal Reserve System, which raises its rates. Outflow of investors’ funds is experienced by all countries with emerging markets.

If new restrictive measures are introduced, then the flight from the Russian market will intensify, which means that under pressure there will be a ruble. The nearest goal in this case is 65 rubles per dollar. If oil quotes fall, then we can wait for a dollar and 70 rubles each.