Surging Oil and Gas Prices Attract Foreign Investors to Russian Market

Image credit: EPA

Global investors are pouring unprecedented sums into Russia’s stock market. They have invested $170 million in the last week alone, Kommersant reports.

They are drawn in by the Russian market’s emphasis on raw resources, which is benefitting from the rapid rise in oil and gas prices. The majority of the investments went to the oil and gas industry, although there was also interest in Sberbank and fertilizer producers’ shares.

“Markets and demand for hydrocarbons are rapidly rebounding after the 2020 slump, despite the fact that this industry has been significantly underinvested over the last year and a half due to COVID and the green agenda. As a consequence, Europe and Asia started to experience a gas shortage,” Dmitry Skvortsov, April Capital Investment Manager, said.

However, market participants are skeptical about the sustainability of these inflows.

“It is clear that there is an opportunistic demand for Russian risk driven by the desire to gain exposure to oil and gas producers, so this spike in interest, regrettably, can hardly be regarded as a steady mid-term trend,” said Vladimir Vedeneyev of Friedrich Wilhelm Raiffeisen. 

Furthermore, the Russian stock market has risen substantially in recent weeks. The MOEX Russia index ended at 4,238 points on Friday, up 3.8 percent from the previous week’s close and 29 percent since the end of last year.

“It is important to recognize that the Russian market has already risen very high and is due for a correction,” said Ilya Golubov, an analyst at PSB.