Russian stocks have slid by almost 30% to a two-year low this quarter. This week, investors have been rattled further by the news that Russia has opted to recognise the independence of Georgia's two breakaway regions, signalling a further deterioration in Russia's relations with the West.
With the newly-confrontational relationship between Russia and the West set to endure, the perception of risk in Russia will stay high, forming a "negative backdrop for asset valuations", says Chris Weafer of Uralsib. Meanwhile, the Georgia crisis prompted investors to pull their money out of Russia at the fastest rate since the 1998 rouble crisis, with foreign exchange reserves sliding by $16.4bn in the week beginning 8 August.
Russia has ample foreign reserves, but with the rouble now no longer a one-way upward bet, due to the Georgia crisis, Russia may find it more difficult to control inflation through currency appreciation, says Peter Burnham in the FT. Yields on domestic rouble bonds have risen by 1.5% in a few weeks, so companies are finding it harder to raise money.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Then there's the hounding of BP and Putin's attack on Mechel, which has revived fears over property rights. Russia may be cheap, but don't count on a quick turnaround.
-
Will the Bitcoin price hit $100,000?With Bitcoin prices trading just below $100,000, we explore whether the cryptocurrency can hit the milestone.
-
Inheritance tax receipts jump 11% even before Autumn Budget overhaulOfficial figures show inheritance tax receipts are rising even before the chancellor’s changes to reliefs
