Russian Markets Show Signs of Recovery
After sanctions were imposed on Russia's financial sector, the initial sharp declines in economic indicators are beginning to stabilize. The Moscow Exchange (MOEX) and RTS indices, which initially fell by 2%, have bounced back to their previous levels, although these levels are not particularly strong. Stocks like MOEX, which dropped 11%, and major banks like Sberbank (down nearly 4%) and VTB (down 5%) have also recovered some of their losses.
The U.S. has intensified its enforcement of secondary sanctions, affecting Russian businesses in CIS countries, the UAE, Turkey, and China. Despite these challenges, the Russian ruble has strengthened against the dollar and euro. The Central Bank of Russia (CBR) now determines the ruble's exchange rate based on off-exchange market data, a method it prepared in advance for potential sanctions against the Moscow Exchange.
Turning to Chinese Financial Systems
With sanctions restricting dollar and euro trades on the Moscow Exchange, Russian companies and investors are increasingly relying on Chinese financial markets. This shift involves using cross-rates like ruble/yuan/euro, which comes with additional costs and less favorable exchange rates but also opens up new opportunities for collaboration with China and diversifying currency reserves.
According to Fontanka Vitaliy Kitaychuk, a financial expert from Only Bank, explained that this approach, although more expensive, is crucial.
"In the face of sanctions, Russian companies and investors will turn to Chinese stock exchanges through cross-rates. This brings extra costs but also new opportunities for working with China and diversifying our reserves," he said.
China’s Growing Influence
China is poised to benefit significantly from the current sanctions. Yulia Kuznetsova, an economics professor at Moscow State University, noted that China will play a larger role in Russia's market as it steps in to replace Western financial systems.
"China will take advantage of this situation to dominate the Russian currency market. Our dependence on China will grow significantly," she explained.
Kuznetsova mentioned that while major Chinese banks might avoid the risk of secondary sanctions, smaller Chinese banks are likely to increase their activities with Russia.
