Coronavirus has created a toxic backdrop for Russian stocks

Russia's stockmarket is down by about 13% since the start of 2020, with the country having the world’s third-highest number of confirmed cases opf Covid-19.

Russia began easing its Covid-19 lockdown this week. The country has the world’s third-highest number of confirmed cases. New daily infections have been running at over 10,000 in recent days. A third of the Russian economy has “ground to a halt”, writes Jake Cordell for the Moscow Times, but the government cannot afford to turn on the fiscal taps. Russia needs oil at $42 a barrel to balance the budget, far away from current prices of around $30 a barrel. The “modest” rescue package will hardly cushion the pandemic blow.  

The limited stimulus is increasing the chances of a “prolonged economic downturn”, says Liam Peach for Capital Economics. The severity of the Russian outbreak means that restrictions remain tighter than in many other countries even after lockdown easing. 

Already discontent with stagnant living standards, the public is souring on Vladimir Putin, whose approval rating has fallen to a 20-year low. This all makes for a politically “toxic backdrop” as Putin looks to reform the constitution in order to extend his rule beyond 2024. 

The Russian stockmarket soared by 39% in 2019, but is down about 13% since the start of 2020. On a price/earnings ratio of 6.7 the benchmark index is undeniably cheap, but this is partly thanks to Russia’s poor record on property rights and the rule of law, which leaves businesses at constant risk of expropriation if they get on the wrong side of the government. 

Recommended

Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023
What is inflation and how will it affect you?
Inflation

What is inflation and how will it affect you?

There has been much talk of inflation recently. But what exactly is it and what does it mean for our money?
24 Mar 2023
3 success stories set for long-term growth
Investments

3 success stories set for long-term growth

A professional investor tells us where he’d put his money. This week: Felix Wintle, manager of the VT Tyndall North American Fund, selects three favou…
24 Mar 2023
Share tips of the week – 24 March
Investments

Share tips of the week – 24 March

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages
24 Mar 2023

Most Popular

Bank of England hikes key interest rate to 4.25%
UK Economy

Bank of England hikes key interest rate to 4.25%

The Bank of England raised rates by 0.25% following a surprise jump in inflation.
23 Mar 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

The Bank of England raised rates to 4.25%, its 11th consecutive increase. Does the base rate have further to go?
23 Mar 2023