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The Russian market saw an outflow of foreign investors’ monetary assets and an acceleration in the decline of key indices by the end of 2021, against the backdrop of foreign policy tensions and mixed signals from international stock exchanges. Talks about Russia’s conflict in Ukraine, aggressive rhetoric between Russia and the West, and the threat of imposing new sanctions all played a role. For the time being, investors are ignoring external factors due to geopolitical risks and the toughening tone of Western countries toward Russia.
The pandemic, and especially the emergence of the Omicron variant of Covid-19, has also had a significant impact on the dynamics of both the global and Russian markets. Furthermore, the suspension of trading in Rusnano bonds created uncertainty and concern throughout the Russian market. One of the year’s highlights was the withdrawal of $220 million in foreign assets from Russian stocks, a new high since April 2020.
This behavior, however, extended beyond the Russian market. Fearing a tightening of the US Federal Reserve’s policy, international investors sold assets in almost all emerging markets, transferring money into shares of US companies as a result. Fed Chairman Jerome Powell tightened his rhetoric ahead of the last Fed meeting in 2021, abandoning the term “transitory inflation,” and the Fed’s last meeting suggested three rate hikes are possible in 2022. Global investors reassessed risk and hedged as a result, and as a result, cash flows are shifting from emerging markets to more stable and crisis-resistant developed markets.