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Why the Russian Index MICEX Is Trading at a Record High

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Nov. 20 2020, Updated 5:21 p.m. ET

Russian index MICEX tests 2000 levels

The Russian index, MICEX, rose to an all-time high—helped by investors turning their attention to how the rebound in crude oil (USO)(UCO) prices can be best captured. The rise in the Russian index is also partly attributed to the fall in Russian inflation. It increased market expectations of a rate cut. The rate cut odds and the rebound of crude oil towards the $50 mark saw the Russian index testing 2000 resistance levels on August 15. Read Is the Fall in Russian Inflation Increasing the Odds of a Rate Cut? for more details on the fall in Russian inflation.

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Crude oil prices post a strong bounce back

Currently, crude oil futures are trading above the 46 levels. Any rise in crude towards the $50 mark would see the Russian index rise above 2000. The Russian ruble is highly correlated to crude oil prices. Crude oil accounts for a substantial portion of Russia’s exports. For more details on the correlation of the ruble and crude oil, read Correlations Between Commodities and Global Currencies. The US dollar-Russian ruble is trading at 63.67 as of 6:00 AM EST.

Impact on the market

Russian ETFs were following a positive trajectory on August 15, 2016. The VanEck Vectors Russia ETF (RSX) provides exposure to companies that are publicly traded and domiciled in Russia—it rose by 2.2%. The iShares MSCI Russia Capped Index Fund (ERUS) rose by 2.3%.

The Russian ADRs (American depositary receipts) were on a negative bias. Mobile TeleSystems (MBT) fell by 0.16%. On the other hand, the energy-related ADR Canadian Natural Resources (CNQ) was trading higher by 1.1%. Also, Baytex Energy (BTE) posted notable gains of 4.2% on August 15.

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