Russian stock market shrugs off new US sanctions risks

Key indices on the Moscow Exchange rebounded on Friday, just a day after the US unveiled new anti-Russian sanctions targeting the nation’s sovereign debt among other punitive measures.

The ruble-denominated Moscow stock exchange (MOEX) index, which reflects the prices of the most liquid Russian stocks of the largest companies, added 0.6% in the afternoon on the last trading day of the week.

Meanwhile, the dollar-denominated RTS index rose around 1%, hitting almost the same levels as it had before Washington’s sanctions were revealed. 

Friday’s rally also comes amid positive sentiment in the international markets, with global stocks trading at or near record highs amid positive economic data from the US and China. Both MOEX and RTS indices have gained this year, adding over 9% and more than 7% respectively. The Russian currency, the ruble, which sank with the news of the latest round of sanctions on Thursday, also reversed its losses on Friday.

On Thursday, the US Treasury announced it would ban American financial institutions from participating in the primary market for ruble or non-ruble denominated government bonds issued after June 14. Additionally, the US moved to expel 10 of Moscow’s diplomats and impose sanctions against more than 30 Russian individuals and organizations. Washington says the punitive measures are in response to Russia’s alleged meddling in the 2020 US presidential election. 

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Thursday’s move expanded on previous US steps taken against the Russian debt that have been in place since August 2019. Back then, the US government moved to restrict purchases of non-ruble sovereign bonds by American banks as well as the lending of non-ruble-denominated funds to “the Russian sovereign” over the alleged poisoning of former Russian spy Sergei Skripal in the UK.

The Russian government has repeatedly denied the accusations that led to both rounds of sanctions. After the latest round, Moscow immediately vowed to retaliate against the “illegal” move and protect its national interests. On Friday, Kremlin spokesman Dmitry Peskov said the Russian economy would weather the new US restrictions because the country’s “macroeconomic stability is fully ensured” by its central bank.

Most analysts have opined that Washington’s recent move against Russia’s debt will not have much impact on its economy. This is because its debt market is dominated by domestic players, with the share of non-residents standing at less than 10%. As of Friday, the Russian government bond index, which reflects the performance of different segments of the sovereign debt market, was up more than 1%.

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