The credit default swap (CDS) market, which many view as a source of true equity valuation, may be an ominous marker for Russian stocks.
In fact, Russian equities may be worth nothing at all, according toresearch posted by MSCIlast week.
“We find that trading in Russian corporate CDS has surged since the Russia-Ukraine war began. Increased trading activity may indicate that the CDS market contains information not present in the equity market.
“Therefore our research incorporates the CDS market’s implied default probabilities to model Russian equity prices,” MSCI said.
An accompanying graph shows that trading in Russian corporate CDS spiked upward in early 2022 and has only fallen off recently, though it remains elevated from what it had been.
MSCI further noted that while the Moscow Exchange saw domestic equity prices fall 40% in the wake of the invasion, the Russian CDS market has essentially gone to zero, with a graph showing that the probability of default for four key Russian equities has also spiked upward and remains at levels around 90%.
It also pointed out that most foreign investors cannot trade Russia’s domestic equities, while the CDS market mostly represents institutional investors.
While Russian companies may continue to operate in a fairly normal way, and their equities may continue to trade on the domestic exchange, the blog says, CDS investors are essentially valuing Russian companies at zero.
Russia ETFs face uncertainty
“This lack of value may be emblematic of a combination of technical-default fear, failure of the CDS auction mechanism, restrictions on trading CDS linked to the securities of sanctioned companies, and a lower perceived value of Russian equity for CDS investors,” the authors said, noting that the pricing divide could be alleviated if the Russia is able to rejoin the global economy and the international sanctions are lifted. However, that does not seem like a likely outcome any time soon.
What this means for the ETFs tracking Russia’s market is up in the air. The Xtrackers MSCI Russia Capped Swap UCITS ETF, the HSBC MSCI Russia Capped UCITS ETF, the Lyxor MSCI Russia UCITS ETF and the Invesco RDX UCITS ETF all halted trading in early March in the days following Russia’s invasion of Ukraine.
On 20 May, BlackRock announced plans to terminate its Russia and Eastern Europe ETFs that track MSCI indices and trade on the London Stock Exchange. The ETFs had combined assets of roughly $126m at the time of the announcement and will delist on or around June 22.
Given that BlackRock has deemed Russia uninvestable, the question of what this means for the rest of the European-listed Russia ETFs.
On 24 February, MSCI revealed it was freezing Russian securities in its indices, the day the Russian invasion of Ukraine began.
After a consultation period, during which it polled investors, it concluded Russian markets were uninvestable and removed Russian securities from its emerging markets indices.
The index provider currently calculates a standalone index for Russia apart from its standard index offering.
This story was originally published onETF.com
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FAQs
Stock market capitalization, billion USD
The latest value from 2020 is 694.74 billion U.S. dollars.
Why is investing in Russia good? ›
The Benefits and Risks of Investing in Russia
The benefits of investing in Russia include: Rich in natural resources: Russia is the world's largest exporter of natural gas, as well as one of the world's largest oil and steel producers.
How many rubles to buy a Big Mac in Russia? ›
According to the Economist's Big Mac index, which looks at currency strength by comparing the price of the popular McDonald's menu item in countries around the world, the Russian Big Mac in normal times cost about 135 rubles, or just under $2.
What is the most valuable stock exchange in the world? ›
The Shenzhen Stock Exchange had a $5.2 trillion market capitalization as of January 2023. National Association of Securities Dealers Automated Quotations Stock Market - Nasdaq, Shenzhen Stock Exchange, New York Stock Exchange, and Shanghai Stock Exchange are some of the biggest stock exchanges in the world.
What is Russia's main source of wealth? ›
It has enormous natural resources, particularly oil and natural gas. It is the world's eleventh-largest economy by nominal GDP, and the sixth-largest by purchasing power parity (PPP). Due to a volatile currency exchange rate, Russia's GDP as measured in dollars fluctuates sharply.
How much money does Russia have invested in the United States? ›
U.S. foreign direct investment (FDI) in Russia (stock) was $14.4 billion in 2019, a 2.6% increase from 2018. U.S. direct investment in Russia is led by manufacturing, wholesale trade, and information services. Russia's FDI in the United States (stock) was $4.4 billion in 2019, down 1.9% from 2018.
How much investment does the US have in Russia? ›
In 2021, the U.S. investments made in Russia were valued at approximately 12.3 billion U.S. dollars.
What can you buy with $100 usd in Russia? ›
10. Russia
- $100 USD equals: 7,326 Russian Rubles.
- What you can buy: One or two high-quality cans of caviar, or 20 Russian nesting dolls.
Money: Any currency and travelers cheques if the total value does not exceed 10000 USD. Otherwise, you will need to declare the amount, so when you leave the country you can prove that you are not taking money out of Russia. The money on your bank card doesn't have to be declared.
How much does a can of co*ke cost in Russia? ›
The average price for all countries is 0.93 USD. The database includes 91 countries.
...
Russia - Coca-Cola - price, September 2022.
| Russia - Coca-Cola - price, September 2022 | |
|---|
| RUB | 55.000 |
| USD | 0.725 |
| EUR | 0.685 |
Berkshire Hathaway (BRK. A) - Get Report is the most expensive stock of all time in terms of its price per share.
Which is the fastest growing stock market in the world? ›
MERJ is world's fastest growing stock exchange |09 April 2020. MERJ Exchange Limited, the pioneering operator of the Seychelles securities market 'MERJ EXCHANGE', has officially been named the fastest growing exchange in the world, according to the latest data released by the World Federation of Exchanges (WFE).
Which is the oldest stock market in the world? ›
Age of leading exchanges worldwide 2022
As of March 2023, the Frankfurt Stock Exchange was the oldest existing stock exchange, having been in operation for 437 years.
Where Russian oligarchs get their money? ›
Many oligarchs took out generous loans from Russian banks, bought shares, and then took out more loans from western banks against the value of these shares.
Where do Russian oligarchs invest? ›
The usual way that Russian oligarchs hide their "dark money" abroad is through shell companies.
Who has all the wealth in Russia? ›
The ten richest Russians in 2023, by wealth (in billion U.S. dollars)
| Characteristic | Wealth in billion U.S. dollars |
|---|
| Alexey Mordashov | 20.9 |
| Vagit Alekperov | 20.5 |
| Gennady Timchenko | 18.5 |
| Alisher Usmanov | 14.4 |
6 more rowsApr 6, 2023
U.S. Treasury securities held by Russia monthly 2020-2023
The value of U.S. Treasury securities held by residents of Russia amounted to 67 million U.S. dollars in January 2023, having declined by 89 percent from the previous month.
Does Russia still owe the US money? ›
Russia divested from all US bond instruments, the only debts the Federal government has, and still owes the US and other investors nearly 300 billion US Dollars. The national debt of Russia was forecast to increase between 2023 and 2028 by in total 36.3 billion U.S.
What does Russia buy from USA? ›
Of the $5.8 billion in U.S. exports to Russia in 2016, the top commodity sectors were transportation equipment (33.9%), machinery and mechanical appliances (31.0%), and chemicals, plastics, and leather products (13.9%).
Which country invested most in USA? ›
The main investing countries in the U.S. are Japan, Germany, Canada, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. In 2021, California received the most investment, followed by Massachusetts and New York (BEA).
In 2021, no country had a higher foreign direct investment (FDI) position in the United States than Japan, followed by the Netherlands and Canada. At that time, Japan had over 690 billion U.S. dollars invested in the United States.
Which country has most U.S. investment? ›
The United Kingdom received the most direct investment from the United States in 2021, an amount exceeding one trillion U.S. dollars.
...
| Characteristic | Direct investments in billion U.S. dollars |
|---|
| United Kingdom | 1,005.47 |
| Netherlands | 885.31 |
| Luxembourg | 715.59 |
| Ireland | 556.6 |
9 more rowsSep 30, 2022
Some of the most common methods include investing in Russian stocks and ETFs (exchange traded funds). With Admirals, you can invest in a variety of different Russian companies that are listed on exchanges in the United States, the UK and elsewhere. This includes companies such as Gazprom, Lukoil and Yandex NV.
How big is the Russian market? ›
Russia's foreign exchange reserves are the world's fourth-largest.
...
Economy of Russia.
| Statistics |
|---|
| GDP | $2.063 trillion (nominal; 2023 est.) $4.989 trillion (PPP; 2023 est.) |
| GDP rank | 11th (nominal; 2023) 6th (PPP; 2023) |
| GDP growth | -2.1% (2022) 0.7% (2023f) 1.3% (2024f) |
| GDP per capita | $14,404 (nominal; 2023 est.) $34,837 (PPP; 2023 est.) |
36 more rowsUnited States Imports from Russia was US$30.76 Billion during 2021, according to the United Nations COMTRADE database on international trade. United States Imports from Russia - data, historical chart and statistics - was last updated on March of 2023. Base metals not specified elsewhere, cermets.
Can I invest in the ruble? ›
The clearest way to buy Russian rubles is to present foreign currency to banks, hotels, and exchange bureaus within Russian borders. This option is, of course, limited only to those who are eligible to enter the country.
Why can't i sell my Russian stocks? ›
Owned Stocks
Shares of stock issued in Russia by Russian companies are traded via depository receipts (DRs) and the Russian government no longer allows them to be traded this way in the United States.
Can US citizens invest in Russian stock market? ›
While everyday investors may not be able to invest directly in the Russian stock market, you may have some exposure to the country through mutual funds, exchange-traded funds (ETFs), and American depositary receipts (ADRs), which are certificates issued by U.S. banks that represent a certain number of shares in foreign ...
How to buy Gazprom stock in us? ›
How to invest in Gazprom
- Sign up to Bitpanda. Create a Bitpanda account and confirm your email address.
- Verify and deposit funds. Confirm your identity with one of our trusted verification partners and deposit funds.
- Start investing in Gazprom.
China dominates every aspect of the bilateral economic relationship, as a net exporter, net creditor and net investor, despite Russia long being a richer country than China.
Russian main exports are energy (oil and petroleum products, gas, coal), rolled steel, ferrous and nonferrous metals and minerals. The greater part of Russian exports belongs to oil and petroleum products.
Who is the biggest buyer of Russian oil? ›
As one might expect, China has been the top buyer of Russian fossil fuels since the start of the invasion.
...
Top Importers of Russian Fossil Fuels.
| Country | 🇨🇳 China |
|---|
| Total Value of Russian Fossil Fuel Imports* | $66.6B |
|---|
| Crude Oil | $54.9B |
|---|
| Natural Gas | $6.1B |
|---|
| Coal | $5.7B |
|---|
19 more columnsMar 2, 2023
Russia and the United States maintain one of the most important, critical and strategic foreign relations in the world. Both nations have shared interests in nuclear safety and security, nonproliferation, counterterrorism, and space exploration.
Who trades most with Russia? ›
The value of total exports from Russia to its major trade partner — China — amounted to nearly 69 billion U.S. dollars in 2021.
What is Russia's biggest export to the United States? ›
Russia-United States In 2021, Russia exported $27.4B to United States. The main products that Russia exported to United States are Refined Petroleum ($13.2B), Crude Petroleum ($3.77B), and Platinum ($2.4B).
How much can 100 ruble buy? ›
Are you overpaying your bank?
| Conversion rates Russian Ruble / US Dollar |
|---|
| 100 RUB | 1.29143 USD |
| 250 RUB | 3.22858 USD |
| 500 RUB | 6.45715 USD |
| 1000 RUB | 12.91430 USD |
8 more rowsThe Russian ruble has gained about 2.5% in the past month and is among the most undervalued emerging market currencies. It's worth considering charts on oil, COVID-19 and the economy before chasing the rally.
