The Russian Financial Market Is Already in Major Turmoil... RTS Index Plummets 19% This Year

Moscow Exchange RTS Index Trend This Year [Image Source= Bloomberg]

[Asia Economy Reporter Park Byung-hee] As tensions between the West and Russia surrounding Ukraine escalate, the Russian financial market has plunged into turmoil.

According to Bloomberg on the 24th (local time), the MOEX index and RTS index of the Moscow Exchange fell sharply by 5.93% and 8.11%, respectively, compared to the previous trading day. The MOEX index is denominated in Russian rubles, while the RTS index is denominated in US dollars.

The MOEX index's decline this year widened to 14.57%, and the RTS index's decline expanded to 19.28%.

Russian government bond yields also soared to their highest levels in six years. The 10-year government bond yield rose to 9.75%, marking the highest level since early 2016. Just three months ago, the 10-year government bond yield was 7.5%.

The value of the Russian ruble also plunged more than 2% against the dollar at one point, falling to its lowest level since November 2020. The Russian central bank announced it would suspend regular foreign exchange purchases. This is interpreted as a concern over the increased cost burden due to the ruble's weakness and the potential to further accelerate the ruble's decline. The ruble's value has fallen more than 10% since October last year.

Viktor Chabo, a manager at Aberdeen Standard Investments, said, "All the news over the past weekend was seriously negative," adding, "No one wants to buy Russian assets."

On the same day, the US Department of Defense announced it had entered a heightened state of readiness to deploy 8,500 US troops to Eastern Europe in preparation for a worsening situation in Ukraine. Jens Stoltenberg, Secretary General of the North Atlantic Treaty Organization (NATO), stated that NATO could deploy additional combat units to Eastern Europe. Earlier, the US and the UK ordered embassy staff in Kyiv, the capital of Ukraine, to evacuate.

Manager Chabo noted that although Russian assets have fallen to very cheap levels, investors are concerned about stronger regulatory measures from the West. He predicted that Western countries might impose sanctions such as suspending the trading of Russian government bonds in the secondary market. Foreign media reported that halting transactions with Russian banks and banning oil and gas exports, which account for half of Russia's fiscal revenue, could also be considered as part of the sanctions.

This content was produced with the assistance of AI translation services.