Russia: Time to pause monetary easing
The recent announcement of a new round of US sanctions and escalation in geopolitical tensions rocked Russian markets. Since the previous CBR policy meeting in late March, the rouble has weakened by 7% vs. USD, prices of Russian bonds have fallen and the stock market has lost more than 7% of its value. The CBR is likely to switch into a cautious mode until it has more clarity on the inflationary impact of the recent developments. We expect it to halt its easing cycle in April, and remain on hold until uncertainty regarding further sanctions is resolved and risk premia currently embedded in Russian asset prices have decreased.
On 6 April, the Department of the US Treasury responsible for sanctions (OFAC) announced a new round of sanctions: several Russian billionaires and their companies have been included in the SDN list. In combination with a crisis caused by the use of chemical weapons in Syria, this event caused a sharp drop in the prices of Russian assets in the following days, including the rouble, Russian stocks, local bonds (see Exhibit 2) and Eurobonds. On 23 April, the US Treasury appeared to soften its position on sanctions against Rusal, perhaps in response to the devastating impact that this measure has had on some of the world’s metal markets. However, over the last weekend, US Treasure Secretary Mnuchin said that the US was still considering further sanctions. In a calmer geopolitical environment, Russian markets would be rallying now with Brent approaching $75/bbl. However, uncertainty regarding further sanctions is weighing on the markets... (please see the full text of the report)
WHY EMERGINOMICS?
- Original take on geopolitical, economic and oil market developments
- Thematic research on hot topics
- Face-to-face meetings and presentations upon request
- Independent views not influenced by the need to comply with a “house view” or priorities imposed from above.
MEET THE FOUNDER. Tatiana Orlova holds a MSc in Economics from the LSE and has worked as an Emerging Market economist and strategist since graduation in 2001. She has been employed in EM research teams in four investment banks covering a diverse range of CEEMEA economies, with a particular specialism in the post-Soviet economies.
Tatiana is a widely known expert on the post-Soviet economies who has given multiple interviews to major world financial media (such as FT, Bloomberg, Reuters, CNBC etc) and spoken at conferences attended by hundreds of clients. Tatiana’s unique background and experience, as well as her deep knowledge of the region’s economics, history and geopolitical realities, allows her to make accurate forecasts and predictions across the range of Fixed Income instruments. She has covered the region’s hydrocarbon producers during the oil crises of 2008-2009 and 2014-2016, and issued a range of successful calls. Most notably, in September 2014 she predicted that Russia was about to lose its investment grade sovereign rating, which was a highly non-consensus view. Similarly, she correctly called imminent downgrades of sovereign ratings of Azerbaijan and Kazakhstan during the following winter. She also has a track record of successful FX and interest rate recommendations.
GET ACCESS TO EXPERTISE IN AN UNDERSUPPLIED MARKET
MIFID II forces big banks to switch to paid subscriptions by Mifid II as of 3 January 2018. Clients who subscribe to standard research packages covering emerging economies in the CEEMEA region may find themselves paying for run-of-the-mill research of variable quality, not always addressing the hottest topics affecting asset prices in a timely manner. Banks have already slimmed down their research teams substantially, and this process will likely continue after the new rules have kicked in. The cuts have already translated in a lack of resources and expertise to provide in-depth macroeconomic coverage, especially of smaller economies in the region.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.