A game for a fall. What is dangerous is the fall of Asian stock markets for Russia

The collapse in world markets continues – following the Asian indices, the Asian stock markets fell. The situation on foreign exchanges may lead to an increase in the cost of foreign currency loans for Russian companies, analysts warn.

On the trading session on Friday, February 9, the key indices of Asia showed a sharp decline. The Japanese stock indicator Nikkei 225 fell 2.32%, the Chinese Shanghai Composite – at 4.02%, the Hong Kong Hang Seng – 3.1%, the Taiwanese Taiex and the Singapore Straits Times – 1.5% and 1.13% respectively. The downward trend in the Asian indices has been observed since the beginning of February. During this time, Nikkei 225, Shanghai Composite and Hang Seng lost more than 9%, while Taiex and Straits Times – more than 7% by 5% respectively.

Sale on the Asian stock exchanges is a consequence of the fall of the US stock market, say the Forbes participants of the financial market. Major US indices – S & P 500 and Dow Jones – since early February have decreased by 8.5% and 8.9% respectively.

Asian exchanges reacted to the situation in the US with a delay – only four days after the sharp collapse in the US market on February 5.

The reason is that investors first thought the event was a normal correction of the US overheated indexes, says Alexander Losev, General Director of the Sputnik-Capital Management Company.

When market participants realized that the US stock market is now adjusting to further tightening of the monetary policy of the Fed – sales began in Asia, the financier explains.

New reality

Investors in both the US and Asia are now in the process of reassessing the risk of owning shares in connection with the future growth in the value of money in developed countries and increasing volatility, agrees the senior portfolio manager of Capital Kapital Vadim Bit-Avragim.

Market participants expect a more serious increase in the rates of the Fed, as well as tightening of monetary policy in the European uniоn.

As a result, the companies raise the cost of borrowing and reduce the potential profit, which puts pressure on the quotes of their shares, explains Bit-Avragim.

According to Alexey Tretyakov, General Director of MC Arikapital, this year the ultra-low volatility period of the past years has come to an end and a new phase has come, in which high volatility will be the norm.

Stiffening rates and reducing the balance on the part of the US Federal Reserve makes US treasury bonds more attractive to investors.

At the same time, the attractiveness of the debt securities of developing countries, which are a priori riskier than those of the sovereign debt of the United States, decreases, therefore in the near future the yield of such bonds will grow.

Correction in the US stock market will continue at moderate rates to those levels that will more closely match the forecasts of the Fed’s rate hike, notes Alexander Losev. After that, consolidation and attempts to increase the shares of individual companies will begin. Asian and European indices will also continue to decline, because they will not be able to ignore the situation in the US, especially since the ECB and the Bank of Japan have for a long time carried out quantitative easing, the financier underscores.

The Russian reaction

The Russian market reacts weakly to fluctuations abroad, as it was initially undervalued relative to other markets because of sanctions, Vadim Bit-Avragim points out. Prices for raw materials are still supported by the overall economic growth in the world, so the Russian market still looks better than analogs, the expert adds.

Nevertheless, in the future, Russia will also face the outflow of foreign capital from the shares and subsequent correction, since the share of non-residents in the total trading volume on the Russian market is estimated at 70-75%, Losev believes.

The ruble exchange rate will not feel a noticeable negative impact, since on February 9 the Bank of Russia reduced the rate by only 0.25 percentage points, thus supporting the Kerry-trade with ruble assets.

The Russian Eurobond market has long ignored the growth in yields of US government securities, but this week the reaction began, adds Alexey Tretyakov. So, eurobonds fell in price by an average of one percentage point, which affected their profitability, he points out. For example, the recently placed Eurobonds of “Rusal” with redemption in 2023 declined by more than 1 pp, and their profitability rose from 4.85% to 5.1%.

Such dynamics can be very sensitive for companies that have a need to borrow in dollars, Tretyakov notes. “But in general, we have few such corporations – most Russian companies do not have a very large external debt, and they generate good cash flow. Therefore, for Russia this situation is not yet critical, “he concluded.


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04.06.2020, 04:24