The MOEX Blue Chip Index has drifted downwards in the past few days as concerns about taxes and lower commodity prices. The index was trading at 16,156 rubles on Monday, lower than the year-to-date high of 16,905 rubles. Still, the index remains about 53% above the lowest level in 2022 after Russia invaded Ukraine.
Falling commodity prices
Russian companies have done relatively well in the past few months despite sanctions by Western countries. Most of these firms did well helped by the soaring crude oil prices. At its peak, Brent jumped to a high of $138 in 2022.
Recently, however, the situation has changed as concerns about the slowing global economy continued. Brent, the international benchmark, was trading at $76 on Monday while West Texas Intermediate (WTI) was trading at $72. Russian Urals are trading much lower. At some point, Russia was selling oil for less than $50 a barrel.
Meanwhile, natural gas prices have also plunged. Data compiled by TradingView shows that natural gas prices have fallen to the lowest level since 2021. Lower natural gas and oil prices hit the MOEX index since most constituents are in the industry. They include companies like Lukoil, Gazprom, and Rosneft.
Other commodities Russia sells are also not doing well. As we wrote here, palladium price has been in a downward trend. The same is true for other commodities like nickel and lithium.
Meanwhile, according to Financial Times, Russia has been forced to increase taxes in a bid to boost its revenue. This happened as Russia’s oil and gas revenue dropped by 45% in the first quarter of the year. Russia’s oil production dropped to 10.4 million barrels per day as shipments to Asia increased.
Meanwhile, MOEX constituents have found that they have billions of Indian rupees that they can’t use. This happened as India’s exports to Russia shrank by 11% as imports soared by to over $41.5 billion.
MOEX index technical analysis
The daily chart shows that the MOEX index has been in a slow bullish trend in the past few weeks. It has managed to move above the 23.6% Fibonacci Retracement point. The index is also being supported by the 50-day and 100-day exponential moving averages. Also, it has retested the key support at 16,258 rubles, the highest point on September 1 last year.
Therefore, despite the challenges, there is a likelihood that the MOEX Blue Chip index will rebound in the near term as buyers target the 50% retracement point at 19,760 rubles.
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