It remains a question what Russia’s plans toward Ukraine are. The last week has been filled with fears that Russian military would cross the border and start a war with Ukraine. These fears have somewhat subsided but they have not disappeared entirely, as Russia is not withdrawing its troops from the border and is deploying field hospitals in close proximity to it.
It is widely considered that a major reason for Russia’s indecisiveness is an unequivocal position of the Western countries about the Crimea annexation and further escalation of the conflict. After the U.S., Canada and EU imposed sanctions on a number of Russian officials, and curbed military co-operation with Russia, Russia may be starting to understand (hopefully) the costs of its actions. Earlier this week, the Russian government suggested that Russian companies consider delisting their shares from foreign stock exchanges and trading on Russian exchanges only (according to Bloomberg). It is apparent that, because the Russian stock market’s infrastructure is less developed, this step would make equity financing for Russian companies less probable and more expensive.
This came after a number of signs that foreign financing is becoming problematic for Russian companies. In particular, debt financing became more expensive after S&P Ratings Services lowered its outlook on Russia from Stable to Negative in late March. According to Bloomberg, Russian government did not hold ruble-bond auctions in five of the last six weeks, while yields on 10-year ruble-denominated government bonds are currently very high, almost 9%. In the meantime, Russia’s two major stock indices are doing quite badly year-to-date: RTS Index is down 16% and MICEX Index is down 9%. An outflow of capital from the country reached up to $70 billion in the first quarter and Russian government expects that it may reach $150 billion in the year as a whole. It is expected that should Russia do something as reckless as invading further into Ukraine, Western markets may entirely close for Russian companies and that country’s economy may fall into a recession.
By: Ukrainian Credit Union Limited
No comments:
Post a Comment