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8.3 Stock market
8.3.1 Equity market dynamics
Equity markets sold off massively around the world at the end of February due to the spreading coronavirus (COVID-19) pandemic, but as the spread of the virus has reached peak in Asian and more and more European countries are seeing their curves flatten a few investors are “buying the dip” and buying equities.
A record $100bn of capital outflows has left emerging markets in the last three months, but as the Institute of International Finance (IIF) reports the outflows are clearly starting to slow and should then reverse.
The Russian market has been particularly hard hit and the number of infections is still rising but stock prices have now stabilised. Moscow mayor Sergey Sobyanin said this week that Russia was “still in the foothills” but the peak is expected to arrive in the next week or two.
The expectation is that after the pandemic is over – which could happen within a month – there will be a rebound. While the shape of the rebound is still not clear, most qualified commentator are ruling out both an extreme L-shape and V-shape, with the majority preferring some sort of “fat U” recovery. Equity prices are expected to go up against, starting in the development markets, but Russia is well placed amongst the emerging markets to see a strong rally thanks to its massive monetary and fiscal reserves.
A few investors have already started to buy again and after losing 40% YTD at its worst in the week of March, the dollar denominated Russia Trading System (RTS) has clawed back some of its losses and was down by a less catastrophic 31.4% YTD as of April 17.
83 RUSSIA Country Report May 2020 www.intellinews.com
