Foreigners keep Russian market afloat

Analysis

Western investors’ optimism is unflagging. Last week, they moved an additional $125 million into funds investing in Russia, the second largest amount for the year, according to Emerging Portfolio Fund Research, behind the previous week’s $140 million.

The Russian market is lagging behind other developing markets in any case. That indicator for China was $3.7 billion the same week, and $1.7 billion in Brazil. Outflow of capital from Russia in the first three quarters of the year was largely connected with political uncertainty from the upcoming parliamentary elections. When Russian President Vladimir Putin agreed to head the United Russia bloc at the end of September, however, those concerns were calmed and macroeconomic indicators came to the fore in investors’ attention. Chief among those was the expectation of rising oil prices.

Russian investors are looking at the market from a different perspective, considering the increasing foreign presence a negative sign. The outflow from Russian mutual funds between October 11 and 17 was almost $107 million, leading to a negative balance of about $200 million for the last three weeks. The same funds experienced an outflow in September as well. Observers say that stock indexes reached new maxim again, and investors remember that, when that happened earlier this year, it was quickly followed by a downturn. Therefore, they prefer to cash in. Leading banks and investment companies are predicting that the RTS index will reach 2300-2500 points by the end of the year. After US indexes fell by more than 2.5% last Friday, a correction on the Russian market looks unavoidable. (kommersant)

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