For eight straight week after President Trump was elected, global investors fell over themselves to buy Russian stocks, driving the MICEX index to record highs. However, the constant Russian headlines climaxing in the last two weeks of chaos has seen Russian stocks collapse - erasing all of the post-election gains and more.
However, as is clear from the chart above, while Russian stocks are languishing at 8 month lows; Russian credit risk remains near 3 year lows.
“We see no reason that the market would return to the difficult-to-justify euphoria seen in the aftermath of Donald Trump’s victory,” Sberbank CIB analysts Cole Akeson and Andrey Kuznetsov said in an e-mailed note on Thursday.
“Recent events in Syria evoke a higher level of caution than in weeks prior.”
Interestingly, the last two days have seen a notable divergence as while Tillerson and Russian Foreign Minister Sergei Lavrov were talking through their disagreements in negotiations in Moscow late on Wednesday, the Micex Index closed at its lowest level since before the U.S. election but Russia's credit risk actually improved...
Almost as if someone wanted to send the message (via stocks - because the mainstream can understand that) that Russia is 'bad'.
The slump has made Russian stocks the cheapest relative to emerging-market peers since 2015.