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Drawbacks of Stability
// Russia’s stock market has become sensitive to oil price fluctuation only recently
Russia’s stock market fell below the psychologically important benchmark of 1500 on Monday. Analysts explain these changes by a new trend of lowering oil prices. However, Russian stock market fluctuations turned out to be less dependent on changes in oil prices than it could have been expected, state Alexey Goryaev of the New Economic School and Alexey Zabotkin of Deutsche UFG in their research. A more important factor is the situation on other developing markets.
Goryaev and Zabotkin tried to determine which factors caused changes in Russia’s stock market in the first decade of its existence – from September 1995 to December 2005. Last year, MSCI Emerging Markets index was the most influential factor. Its fluctuation by 1 percent causes RTS index to change by 0.96 percent. International oil prices affect the volatility of RTS index far less: 5.52 percent. Changes in the refinancing rates of leading world banks hardly influenced Russia’s stock market.
Yet, even this moderate dependence of RTS index on oil prices has appeared in several recent years only, says Alexey Goryaev. Other factors determined Russia’s stock market before, such as political risks and low quality of corporate governance. However, the political factor hardly affects the stock exchange now.
Situation on stock markets of developing countries is the main factor now. Besides, the excessive liquidity of Russia’s market greatly contributes to its fluctuations. Still, Zabotkin admits that long-term influence of oil prices is much stronger. Another important factor is that investors often go by not the actual oil prices, but the subjective and thus inestimable expectations about long-term trends.
All the Article in Russian as of Sep. 27, 2006
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