Russian stock market sees largest drop since 2008 amid Putin’s move to recognize ‘republics’ in Donbas

22 February 2022, 11:54 AM

The Russian stock market on Feb. 21 saw a new “Black Monday” as shares fell to November 2020 levels after Russian President Vladimir Putin’s move to recognize the so-called “people’s republics” of Donetsk and Luhansk, Russia’s Interfax news agency reported on Feb. 21.

The Moscow Exchange (MOEX) index fell by 10.5% (to 3036.88 points) in trading, while the Russian Trading System (RTS) index sank by 13.2% (to 1207.5 points).

Since the beginning of the year, their cumulative falls have been 19.81% and 24.33%, respectively.

The total volume of daily trading in the shares tracked by the MOEX index amounted to a record RUB 505.353 billion.

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The prices of most “blue chips” (highly reliable companies) on the MOEX fell by up to 18.3%. Russian Aeroflot airlines’ shares fell 15.8%, those of commercial bank VTB by 17.3%, Gazprom energy giant saw a fall of 10.1%, Lukoil oil company – 6.9%, state-owned bank Sberbank – 16.9%, and Rosneft oil and gas company – 18.3%.

The U.S. dollar forex rate rose to RUB 78.7 per dollar (by RUB 1.4), and the euro soared to RUB 89.32 per euro (by RUB 1.7).

The Bloomberg business news agency notes said the Russian stock market had experienced its biggest drop since 2008. In particular, the MOEX and RTS indices slumped to 14% and 17%, respectively.

“Uncertainty still rules,” Cristian Maggio, London-based head of portfolio strategy at TD Securities said before Putin’s address. “In the case of armed conflict, Russian assets will weaken substantially more than now.”

Russian Eurobonds are falling in price

Russian Eurobond quotes also fell on Feb. 21 amid growing geopolitical risks, Interfax wrote.

The credit default swap (CDS) reached 320 basis points.

The price of Russian government Eurobonds maturing in 2030 had fallen by 110 basis points by 1810 Moscow time, to 105.07% of par.

The rate of return rose to 5.15% per annum (up 47 basis points from the previous day).

Russian Eurobonds quotes maturing in 2043 fell by 328 basis points to 108.07% of par, and the rate of return grew by 24 basis points to 5.25%.

Eurobonds maturing in 2042 fell in price by 377 basis points to 104.14%. The rate of return increased by 29 points and amounted to 5.29% per annum.

Bonds maturing in 2026 were down 200 basis points to 99.57%. The rate of return grew by 52 basis points to 4.86% per annum.

Meanwhile, Eurobonds maturing in 2023 fell by 47 basis points to 103.19%. Their rate of return increased by 30 basis points, to 2.77% per annum.

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