Russian Stocks Fall Toward 10-Month Low

The MOEX Russia Index fell to 2,550 in October, testing year-to-date lows as more sanctions against Russia pressed the outlook for major energy companies and Moscow's fiscal stability. Rosneft and Lukoil plunged to two-year lows after the US sanctioned both oil giants, which together account for half of Russian oil exports and a large portion of the federal government's budget revenue. Indian refineries noted that sanctions from the US government are likely to halt oil orders from Reliance and state processors, magnifying the impact of the measures. Similarly, Novatek and Gazprom sold off the EU was set to prohibit members from buying Russian LNG as of 2027. On top of that, equities were pressured by the signal of restrictive policy by the Bank of Russia in its latest decision, despite coming with a small rate cut. Russian stocks had declined sharply since August as higher inflation and a lower public spending outside of defense dented domestic economic activity.

The MOEX Russia Index sank to the 2,650 mark on Thursday, close to the year-to-date low of 2,540 from on October 14th as additional sanctions against Russia pressed the outlook for major energy companies and Moscow's fiscal stability. Rosneft sank 5% to a two-year low and Lukoil dropped 4% after the US sanctioned both oil giants, which together account for half of Russian oil exports and a large portion of the federal government's budget revenue. Indian refineries noted that the sanctions and additional pressure from the US government are likely to halt oil orders from Reliance and state processors, magnifying the impact of the measures. In the meantime, Novatek dropped 3.5% and Gazprom lost 2% as the EU was set to prohibit members from buying Russian LNG as of 2027. Russian stocks had declined sharply since August as higher inflation, high interest rates by the CBR, and a lower public spending outside of defense dented domestic economic activity.

The MOEX Russia Index fell to below 2,800 in the latter part of September, tracking the broad pressure on Russian assets on the pessimistic outlook for the Russian economy. The US pressured G7 countries to tighten sanction against Russia due to their invasion of Ukraine and recent airspace violation on NATO members, driving Brussels to propose stricter penalties against Russian oil and financial companies and the anticipation of total Russian LNG ban. This magnified the impact of low natural gas prices on major Russian producers, with Gazprom trading relatively close to its record low at RUB 120 per share. In the meantime, sanctions also threatened to target tankers and third countries still buying Russian oil and fuel, extending deep losses for Lukoil and Rosneft since the start of the year. Broad pressure on the Russian corporate sector was also owed to bets that the CBR may have finished its cutting cycle as higher taxes in Russia's new budget may rekindle inflation.