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- External spurt: how long will the growth of stocks last against the background of positive geopolitics
External spurt: how long will the growth of stocks last against the background of positive geopolitics
If the peace plan developed by the American administration to resolve the conflict in Ukraine is adopted, the Moscow Exchange index will rise to about 3,200 points, experts interviewed by Izvestia believe. Over the past three days, it has already jumped by more than 8% — the index has tested the 2,700 point mark, amid news about the US determination to accelerate progress towards a peaceful settlement. Shares of companies sensitive to geopolitics— such as Aeroflot, Lukoil, and Tatneft, grew actively, adding up to 9%. Whether the rally will continue and what the Moscow Exchange index will be by the end of the year is in the Izvestia article.
How will the Moscow Exchange index change after the adoption of the peace plan
The adoption of a peace plan to resolve the conflict in Ukraine proposed by the United States will push the Moscow Exchange index to 3000-3200 points by the end of the year, experts interviewed by Izvestia believe. On November 19, Axios reported that the administration of US President Donald Trump was preparing a 28-point plan for a peaceful resolution of the conflict. At the same time, Washington expects Ukrainian President Vladimir Zelensky to sign a peace plan by November 27, after which the document will be handed over to Moscow, The Financial Times newspaper wrote.
The Moscow Exchange index, reacting to the positive news agenda, added more than 8% in just three days, testing the 2,700 point mark. During this time, shares of companies sensitive to geopolitics have also grown actively: Aeroflot (+4.5%), Novatek (+6.2%), Lukoil (+7.9%), Tatneft (+8.8%).
However, there are three scenarios for the development of the situation, experts say. The probability that the peace plan developed by the United States will be approved before the end of the year remains low. European and Ukrainian officials are opposed to the current version of the document: it was prepared without their participation, and now politicians insist on significant amendments. The most realistic scenario involves delays and pauses in discussions. In this case, the Moscow Exchange index will gradually decrease and reach 2,500 points by the end, believes Alexander Bakhtin, an investment strategist at Garda Capital.
Some experts have more positive expectations from a neutral scenario. A pause in negotiations is likely to drive the index into the side corridor of 2600-2800 points by the end of the year, according to Fyodor Sidorov, founder of the School of Practical Investing. According to him, the market will live up to the expectations of every information event, and volatility will remain high.
At the same time, it is possible that the peace plan will not be signed at all — in this case, the stock market will test the lows and roll back below 2500 points, Fyodor Sidorov believes. Alexander Bakhtin admits that the index may drop to 2000 points. Then all exporters and cyclical companies will be under pressure, especially those with high debt loads, Fyodor Sidorov explained. And the financial sector and internally oriented businesses will benefit — banks, retail, telecom, IT companies that are less dependent on the external environment, he added.
If the document on a peaceful settlement is adopted, the index of the trading platform can rise even above 3,000 points, the experts surveyed noted. The main impact on the movement of quotations this year is exerted by geopolitics, as restrictions for the Russian Federation and its foreign trade partners directly depend on it, said Vladimir Chernov, analyst at Freedom Finance Global. He assumed that the indicator could reach 3200-3500 points.
Fyodor Sidorov's prognosis is more moderate — about 3,000 points. At the same time, he names airlines, logistics companies, as well as the oil and gas sector, which could potentially receive sanctions relief, among the main beneficiaries of the situation. At the same time, protective assets, primarily gold miners, may be in the group of possible outsiders: as the risk premium decreases, investors' interest in them usually decreases, the expert noted.
If a positive scenario develops, the cryptocurrency may also decline under pressure. Now the price of bitcoin has already rolled back by 30% from its maximum (about $ 125 thousand) and amounted to about $83 thousand at 16:40 Moscow time on November 21.
What does the adoption of the peace plan mean for the Russian economy
In the oil and gas sector, Gazprom and Novatek remain the most sensitive to the geopolitical agenda. Investors still have hopes that in case of a positive outcome of the negotiations, the first corporation will be able to at least partially restore exports to the European Union, and the second will be able to advance the development of projects in the field of liquefied natural gas (LNG), said Sergey Kaufman, an analyst at Finam. However, according to him, it is difficult to expect a significant improvement in the position of Russian gas companies: competition with American LNG will continue to put pressure on the market.
For airlines, such as Aeroflot, normalization of the situation may mean a gradual opening of airspace and a return to international routes, he added. This will increase revenue from passenger transportation and accelerate the lifting of restrictions on the supply of components.
The banking sector may also become one of the main beneficiaries of a possible truce and a gradual "warming" of relations between Russia and the West. This will simplify international settlements for Russian companies, support the growth of banks' commission income, and potentially pave the way for unblocking their assets abroad, the expert said. Exchange operators, primarily the Moscow Exchange, will also benefit. Such a scenario will unlock the funds of clients located in foreign jurisdictions, and will also create the prerequisites for resuming trading in the dollar and a number of foreign instruments, Sergey Kaufman added.
However, many investors are suspicious of the geopolitical news of recent days, Lyudmila Rokotianskaya, an expert on the stock market at BCS World of Investments, noted. After several unsuccessful attempts at a "peaceful rally" over the year, the market lost faith. According to the expert, this is clearly visible in the dynamics of key securities — the movement remains extremely cautious, and bidders tend to lock in profits at the slightest growth impulse, fearing that the situation will again go according to a negative scenario.
Nevertheless, the further growth of the Moscow Exchange index will be influenced not only by geopolitical signals, but also by the Central Bank's decision on the key issue at the December meeting, investor Fedor Sidorov is sure. The rate is currently at 16.5%, and inflation slowed to 7.2% by mid-November. He added: if the Central Bank continues to ease policy, it will open up additional potential for revaluation of stocks, especially of exporters and commodity companies.
The neutral scenario remains the most realistic one right now. According to the expert, in such conditions it is more reasonable to keep a balanced portfolio — dividend instruments with predictable payments and a small share of shares of exporting companies. There will be no losing companies in general, but it will become more difficult to make money on the growth of quotations — the main return will be on dividends.
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