Article / 13 June 2016 at 10:30 GMT

Oil downturn not yet a disaster for Russian stocks

Russia oil and gas expert
United Kingdom
  • Steep decline in crude has not wiped out Russian indices
  • Longer-term investors may be buying on dips
  • Russian stock gains have not kept pace with crude oil

Crude oil
Crude oil prices have soared and then begun a dive as of late, but Russian equities remain more stable than the country's premier export. Photo: iStock 

By Nadia Kazakova

The sharp reversal of the Brent oil price on Friday might have been dramatic, but it has not completely wiped out Russian assets' weekly gains. 

The MSCI Russia Index ended the week up 2.8% week-over-week, pushed up by a positive return on the MSCI emerging markets index (up 0.9% w/w) and a gain on the one-month continuous Brent futures (1.8% w/w).

Absolute and relative performance of MSCI indices, Brent one-month futures and USDRUB:

Year-to-date, though, the return on Russian blue-chip equities are a far cry from the gains seen in one-month Brent futures. It seems that equity investors are reluctant to start pricing $50/barrel oil into their equity valuations just yet. 

A few oil price fundamentals are turning bearish and there is an uncomfortable comparison to be made with last year when a deep oil price correction happened in the second half of 2015. 

One consolation for Russian equity holders is that the correction/turnaround in the oil price might have been anticipated and therefore a modest decline in the oil price ($5/b or so) might have been already priced in. 

Money flows in Russian equity funds have turned positive over the last couple of weeks. The data, however, do not take into account the oil price weakness seen at the very end of last week. 

Fund flows into Russian equity funds and MSCI Russia Index performance, $ million:

Create your own charts with SaxoTraderGO click here to learn more


A sizeable inflow of $80 million (for the seven days ending June 8) followed an $18 million net inflow on the previous week ending June 1. Thus, some of the money withdrawn throughout May ($334m over the four weeks to May 25) did come back, driven by another mood swing over the pace of the US rate increases. 

Despite the chunks of money moving in and out of Russian equity funds, the MSCI Russia index has barely changed over the period. As of June 10, it was at 483 – roughly the level seen both one and two months ago. 

One explanation could be that longer-term investors are using dips to buy into the market (those who want to have an increased exposure), while others are selling into mini-rallies. On balance, it seems, the counter-flows might be of a similar size, leaving equity prices relatively stable and short-term punters disappointed. 

If this trend continues, Russian asset prices might be able to sail through the oil price correction. 

Next on the horizon is the Saint Petersburg Economic Forum on June 16-17. If nothing else, it will generate some (hopefully) positive headlines, which is always welcomed by markets.

Saint Petersburg
Can the market-movers set to meet in Petersburg provide the financial press 
with enough positive headlines to boost Russian indices? Photo: iStock 

— Edited by Michael McKenna

Nadia Kazakova is a specialist on Russia, particularly the oil and gas sector
13 June
Tepord Tepord
What are the real reasons for the Obama Administration rejecting the proposed keystone pipeline?
13 June
Tepord Tepord
The number of oil rigs rose by 3 to 328. The number of gas rigs likewise rose by 3 to 85. This brings the total active U.S. rig count to 414. The past two weeks mark the first consistent increase since July 2015.
13 June
Tepord Tepord
This time last year, there were 635 active oil rigs and 221 gas rigs.
13 June
Tepord Tepord
Earlier this week, oil prices hit fresh 2016 highs amid last week's reported rise in U.S. active rigs, ongoing supply disruptions in Nigeria due to violence, signs of rising demand, and a weaker dollar.
13 June
Tepord Tepord
Ranges Of Wave Height?
13 June
Tepord Tepord
That said, the EIA weekly US production number for the 1st week of June rose by 10,000 bopd - the first rise since March 4th.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail