Christopher Granville, Managing Director, EMEA & Global Political Research at Trusted Sources, told CNBC Tuesday that the gains in Russian equities are based on two things.
“One is the OPEC production restraint deal including with Russia in late November last year, which drove the oil price up to mid-$50 a barrel or higher,” Granville said.
“And secondly and much more interestingly, hopes for a geopolitical easing of tensions between Russia and the United States, and Europe, with both the election of Donald Trump in the United States and the European mood might become less hostile to Russia, and that hope was based in particular on the prospect back then of Francois Fillon would be the most likely winner of the French Presidential election.”
Granville added that these two factors have slightly gone away but nevertheless Russia’s economy is recovering, if not at full tilt then definitely at a pace analysts predicted, and the valuations remain very cheap.
The Russian ruble is trading near its strongest this year, supported by tight monetary policy and recent dollar weakness, among other factors. The currency is up nearly 7 percent since the start of the year. Micex, the Russian equity index, is up more than 4 percent since the U.S. election took place on November 8 last year.
“The furor over Russia in Washington DC is more to do with domestic politics in the U.S. rather than Russia but it does prevent the Trump administration from implementing its stated plan of seeking better relations with Russia. It makes that politically difficult if not toxic.”
The U.S. intelligence community earlier accused Russia of interfering in the 2016 election, alleging Russian President Vladimir Putin ordered a campaign to undermine faith in the electoral process and developed a “clear preference” for President Donald Trump.
Recently, a U.S. Senate committee investigating suspected Russian interference in the election will interview President Trump’s son-in-law Jared Kushner, after Russian bank VEB confirmed its executives met Kushner while under Western sanctions.