For those interested in investing in Russia, being familiar with its stock market indices is essential. In this post, we will analyze 4 the most prominent stock market indices for Russia.
Russia has one of the most mysterious stock markets in the world. Much is unknown about the companies that operate there. Russia is seen as a massive country with plenty of potential, but also numerous challenges.
For obvious reasons, the Russian stock market is one of the cheapest in the. Its currency is also very cheap. And, to add to the positives, its fiscal position is enviable as the government has basically no net debt.
At the same time, the Russian economy could benefit greatly from an inflationary boom in the commodities space. Therefore, it can act as a hedge against inflation and a macroeconomic diversifying asset.
Approximately 40% of the country’s market capitalization is concentrated in the energy sector, and another 20% in the production of other raw materials.
The biggest risk for those who want to invest in Russia is legal uncertainty. On the one hand, the rule of law in Russia is quite weak. On the other hand, for many global investors, particularly in the West, sanctions stand in the way.
In the next sections, we will analyze the 4 most important stock market indices for Russia:
RTS Index (Russian Trading System)
The Russian Trading System, also known as RTS or RTS$ index, is the main Russian stock market index for foreign investors.
It is composed of the largest companies listed on the Moscow Stock Exchange. The number of constituents in the index varies over time but is usually around 40.
The reason why the RTS is the favorite index for foreign investors in Russia is that it is quoted in US Dollars (USD). This is important when it comes to analyzing the historical performance of the Russian stock market, since the local currency has been very volatile over the last few decades.
As expected, the RTS is dominated by the energy sector, but the stock with the largest weight in the index is Sberbank, a financial institution. This is because companies are weighted based on their market capitalization adjusted for free float and many energy producers are partially owned by the government.
If you want to know more about the RTS, or its sister index MOEX, which we analyze next, check out this link.
MOEX (Moscow Stock Exchange)
The MOEX was the first stock market index launched by the Moscow Stock Exchange after the fall of the Soviet Union in the early 1990s.
The MOEX is exactly the same index as the RTS. The only difference between the two is that the MOEX is quoted in Rubles (RUB), so it is usually the main stock index for domestic investors.
The Moscow Stock Exchange also calculates a version of the index in Euros for European investors.
Another interesting index for those who want to invest in Russia is the MSCI Russia. Especially for those who want to do it through an ETF.
The MSCI Russia, calculated by the US company MSCI, is a stock market index composed of all Russian stocks that are part of the MSCI Emerging Markets Index.
The exact number of stocks fluctuates over time but is usually between 25 and 30, so it is slightly less diversified than the RTS and the MOEX.
If you are looking for an ETF that tracks the MSCI Russia, keep in mind that MSCI calculates several alternative indices which impose caps on the weights that certain sectors and companies can have in the index.
If you want to know more about the MSCI Russia, here is the link to the official website. Bear in mind, however, that some calculations ceased in 2022.
Finally, the FTSE Russia offers us another alternative to invest passively in the country.
The FTSE Russia is owned and published by the company FTSE Russell, and composed of all Russian stocks that can be found in the FTSE All World Index.
Because the number of constituents is usually between 30 and 40, and because companies are weighted according to their market capitalization adjusted for free float, the FTSE Russia has a very high correlation with the other indices discussed in this post.
It is worth highlighting that certain calculated were put on hold by FTSE Russell in 2022.
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And if you are interested in the stock indices of the largest emerging country in the world, check out this link:
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