Russian Stocks Collapse At Record High Since September 2022

The collapse came after the Russian Foreign Ministry's statement about the destruction of relations with the US.

Russia's stock market reacted with its strongest drop in three years to sharp statements from the Russian Foreign Ministry, which signaled that hopes for an end to the war in Ukraine have all but come to naught, The Moscow Times reported.

On Wednesday, the MosBirch index fell to 2,563.3 points, the lowest since last December, and compared to Tuesday's close of trading, it collapsed by 4.05%, a record high since September 2022.

As of 6:35 p.m. Minsk time, shares of Gazprom were down 4.1%, Sber by 4.9%, VTB by 4.7%, and Rosneft by 2.5%. Severstal shares fell by 4.9%, Aeroflot - by 5%. Rostelecom, Inter RAO and Magnitogorsk Iron and Steel Works lost more than 5%. By 6.7% collapsed quotes of "Mechel".

"The pressure on investors continue to exert geopolitical factors", the market covered "panic selling", says the director of strategy "Finam" Yaroslav Kabakov. The precipitous fall began after statements by Deputy Foreign Minister Sergei Ryabkov: he said that relations with the United States are "destroyed to the foundation," the Kremlin sees no counter steps from Washington, and the momentum after the meeting between Vladimir Putin and Donald Trump in Alaska is "exhausted."

The day before, Putin himself said at a meeting with General Staff generals that the task for them "remains the same" - "to ensure the unconditional achievement of all the goals of the special military operation."

"After a period of inflated expectations and rising stock market quotations, a wave of pessimism has hit investors," PSB analysts wrote. The MosBirch index fell for the fifth week in a row, and compared to the values of February, when the talks between Putin and Trump began, has lost more than 22%, or 1.3 trillion rubles in terms of capitalization.

A prolonged fall in the stock market is usually a harbinger of unpleasant economic problems, notes Andrey Khokhrin, CEO of Ivolga Capital. Pumped up by trillion-dollar spending on the army and weapons that created the illusion of growth in 2023-24, Russia's economy is slowing rapidly, with GDP growth virtually stagnant at 0.4% year-on-year in July and August. Industries outside the military-industrial complex are falling: clothing production by 9.1%, furniture by 12.7%, food by 2.1%, and metallurgical products by 8.4%.

The World Bank forecasts Russia to grow only 0.9% this year, 0.8% next year, and 1% in 2027.

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