Top 10 Takeaways:
- Russia’s market crash – one of the worst in history
- Russia saw the largest monthly loss in February 2022 in 24 years
- Russia’s risk skyrockets but remains below previous records
- Russia’s risk increase stands out among other emerging markets
- The risk of the ruble climbs but remains below prior currency crises levels
- Risk remains stable in 2022 for most emerging currencies except for RUB & TRY
- All countries in the STOXX Europe 600 index posted year-to-date losses except for Norway
- The UK is no longer the biggest contributor to Developed Europe’s YTD performance
- Not all European sectors fell following Russia’s invasion of Ukraine
- Developed Europe has underperformed the US, Asia and Global Markets
1. Russia’s market crash – one of the worst in history
- Russia and Ukraine’s markets fell 29% and 15% (in terms of US dollars), respectively, on the day Russia invaded Ukraine—24 Feb 2022.
- The Russian stock market has been closed since the day of the Russia’s invasion — the longest closure since 1998.
- Russian stocks dropped further 31% on Monday, Feb. 28.
- By March 2, Russia’s YTD cumulative return was -50% in RUB, and -65% in USD.
- Russia greatly underperforms both Ukraine and Emerging Markets in aggregate.
2. Russia saw the largest monthly loss in February 2022 in 24 years
February 2022 saw the largest monthly decline in Russian stocks, of 55% (USD), larger than Aug-98 (of 42%) during the Russia Default Crisis.
3. Russia’s risk skyrockets but remains below previous records
Russia’s risk saw the largest jump in 25 years. As of March 2, its short-horizon risk exceeded the highs seen during the Global Financial Crisis, but it remained below the 1998 peak. The lack of trading of Russian stocks is probably keeping volatility down.
4. Russia’s risk increase stands out among other emerging markets
- Most emerging countries saw their “extra-market” risk rise in 2022, but Russia’s risk stood out.
- Extra-market risk is the risk related to the country over and above that of other risk-model factors, which can be interpreted as how similar to, or different from, the country is from the overall emerging markets.
5. The risk of the ruble climbs but remains below prior currency crises levels
- The risk of the ruble climbed as the Russia currency hit a record low against the US dollar.
- However, the ruble’s risk was about half the levels seen during the Ruble Crisis in 1998.
- The Turkish lira remained the riskiest among emerging country currencies.
- The Russian (RUB) and Ukrainian (UAH) currency’s current risk was relatively low compared to the high levels of currency risk in other crises.
- However, we are only two weeks into the armed conflict and the rise in currency risk may not yet be fully reflected in the risk model, but currency risk is likely to go up in the near future.
6. Risk remains stable in 2022 for most emerging currencies except for RUB & TRY
The risk of the Russian ruble doubled, while that of the Turkish lira fell since the end of last year. Still, the lira remained the most volatile among emerging currencies.
7. All countries in the STOXX Europe 600 index posted year-to-date losses except for Norway
- All countries in the STOXX Europe 600 index posted year-to-date losses except for Norway which is one of the largest providers of crude oil and natural gas to Europe, after Russia.
- Norway and Denmark, which are net exporters of oil and gas, recorded gains after February 22, when the Russian parliament authorized Putin to use military force outside the country.
- Austria, Poland, Germany, France, Italy, which are heavily reliant on Russian oil and gas, were the most negatively affected after February 22.
8. The UK is no longer the biggest contributor to Developed Europe’s YTD performance
- Despite having the largest weight in the STOXX Europe 600 Index, the UK’s YTD contribution to the index loss neared zero.
- The largest countries in the index with the biggest reliance on Russian oil and gas had the largest impact on the European’s index YTD loss of 10%.
9. Not all European sectors fell following Russia’s invasion of Ukraine
- Consumer Discretionary, Financials, Utilities and Communication services suffered the greatest losses following Russia’s invasion.
- However, Materials, Health Care, Real Estate and Industrials were up over the same period.
- Accounting for their weights in the index, Health Care and Materials had the largest positive contributions to the index return since the Russian invasion, while Financials and Consumer Discretionary had the largest negative contributions.
- Financials, Industrials, Consumer Discretionary and Info Tech’s contributions to index risk greatly exceeded their respective sector weights.
10. Developed Europe has underperformed the US, Asia and Global Markets
- Developed Europe now underperforms the US, Asia and the Global markets.
- STOXX Europe 600 YTD return dipped below 10%.
- Bear in mind that the European index does not hold Russian stocks.
- Still, the European index’s volatility lags that of the STOXX USA 900 Index and STOXX Global 1800 Index.
For questions or comments about this data, please contact the Qontigo Applied Research team.