What is happening on Russian capital markets?!
smartmoney.oneLocal funds, including managing companies and NPFs, have a negative view of the stock market.The main reason for the negative view of the equity market is the short planning period, the high risks of reduced operating flows of export-oriented companies, and the uncertainty with the rouble exchange rate, which significantly increases the risks of investing in companies with a focus on the local market. A potential equity overhang following GDR conversion into shares adds to the downside.The overhang from sales of Russian companies' receipts by residents after delisting and local shares by non-residents (should the ban be lifted) could exceed $60 bln (₽4,500 bln), or 14% of current market capitalisation.Source: ITI Capital, BloombergMeanwhile, the bond market is moving in an opposite direction following a sharp cut of the key rate (on April 8). The rouble is strengthening against the dollar, despite easing of capital flow restrictions due to low demand for the hard currency and its limited supply in the banking system.Other important reasons behind the market decline1.Delisting of Russian shares/equity sales by residents.
Delisting legislation will come into force on April 27 - Russian companies have until 5 May 2022 to terminate the contracts under which they offered securities under foreign law and close the depositary receipt programmes.We estimate that, based on the equity share of the receipts, their value after conversion into local securities will amount to ₽9,245 bln, or 27% of the Moscow Exchange's capitalisation.