The Russian currency market will experience a massive outflow of foreign capital that came to the purchase of bonds of the government of the Russian Federation, supporting the ruble in the conditions of collapsing oil prices and Western sanctions.
The largest foreign investor in the Russian ruble and the national debt — the Pension Fund of Norway announced in early September about the decision to completely eliminate their investments in Russia. The richest sovereign Fund on the planet, whose assets in 2017 reached $1 trillion, plans to sell bonds to developing countries and leave the portfolio securities only in U.S. dollars, euros and British pounds, according to Finanz.
At the beginning of July on the Norwegian Fund balance there were bonds of Federal loan of $2.9 billion, says Raiffeisenbank in his review. Under the new rules, these securities will be sold, and the proceeds of the RUR is converted into the currency that the Fund withdraws from Russia.
As a result, the public debt market of the Russian Federation will lose almost 20% of all foreign investments made in the last 1.5 years — in sum, during this time, non-residents invested in Federal loan bonds (OFZ) $14 billion This record in the history of the influx of “untied” the ruble from oil and by the summer of 2017 has raised its rate to 10% above fundamentally justified values, the analyst PSB Michael Poddubsky.
According to Raiffeisenbank, the Norwegian pension Fund represents 10% of all investments of nonresidents in the OFZ. Quick sale of such a package could lead to a collapse in the market, so in the interests of the Fund to come out gradually, dropping the paper in small portions, says the head of the Department of investplus and underwriting Communication-Bank Alexander Nikonov.
The risk, however, is that the outcome of a single large investor can induce others to follow his example, warns analyst of Raiffeisenbank Denis Poryvai. Rally in the OFZ market, which threw their price to highs in 2013, almost exhausted, and it is based on the reduction in the rate of the Central Bank in the years ahead, he explains: with inflation at 4% and the rate of the Central Bank’s 6.5% 10-year bonds will give a yield of 7.2-7.4 percent, while now the market value is already 7.5%.
However, the most serious risk to the market of the Russian debt and the ruble remains a new package of sanctions of the United States: signed by President Donald trump bill laid down a Directive to the Ministry of Finance of the States to consider a complete ban on investments in government bonds of the Russian Federation, recalls the managing Director of “Arbat the Capital” Alexey Golubovich: “although not made a decision yet, obviously, it is not far off, and who do not have time to sell, he himself is to blame”.
Warns strategist at Bank of America Mike Harnett, speculative pyramid in the currencies of developing countries are built slowly, and fall, usually overnight, when the volume of investment “rolls over”, the smallest risk may cause a chain reaction and capital flight.
In the case of a mass Exodus of foreigners from BFL with oil at 50 just the dollar will rise to 70 to 73 rubles, predicts Golubovich.