(BFM Bourse) – A scent of Cold War is blowing again between Russia and the West as Moscow shows off its geopolitical and military power on the Ukrainian border. However, these appear to be largely disproportionate to the economic and stock market weight of the country.
The sound of boots resounds again at the Ukrainian border. But we must not delude ourselves: if Russia still has a considerable geopolitical power of nuisance (part of Europe being dependent on its gas, even its wheat), the country is only a shadow of the economic power that it was. Since the dissolution of the USSR in 1991, the downgrading has been spectacular. Russia ranks in 2020 only 11th in the world, between South Korea and Brazil. The observation is even clearer if we take into account the GDP per capita, since that of Russia only emerges at around 10,000 dollars per year, i.e. six times less than that of a United States or four times less than that of a Frenchman.
On the stock market, the situation is no more folichonne. The main index of the Moscow market, the Moex, which includes 41 stocks representing approximately 90% of the market capitalization of all stocks listed in Moscow, only shows a valuation of 54.514 billion rubles on February 10, i.e. less than 640 billion euros – the equivalent of a quarter of the CAC 40. LVMH alone (first European capitalization) therefore weighs 56% of the combined valuation of the 41 companies making up the star index of the Moscow Stock Exchange. And Apple weighs about 4 times all Russian listed companies.
Looking a little closer, three companies additionally enjoy a combined weighting above 40% within the index. These are the gas and oil giant Gazprom (15.91%), the oil producer Lukoil (12.95%) and the bank Sberbank (12.91%). None of them, on the other hand, exceeds the threshold of 100 billion euros in value, when 5 French companies (and more than twenty in Europe) do so. Driven by soaring gas prices, Gazprom is the one that comes closest with a valuation of 93.4 billion euros – which places the group around 145th in the world.
Ultra-dependence on raw materials
Among Moex’s other large caps, there is another (public) oil company, Rosneft (72 billion) and another gas producer, Novatek (nearly 60 billion euros), of which TotalEnergies is a 20% shareholder. Specialized in the exploitation and transformation of nickel and palladium, Norilsk Nickel is valued at 42 billion euros.
Behind, the hole is gaping since the seventh largest valuation of the MOEX, the mining company Polyus Gold, reaches only 19.2 billion euros of valuation – the equivalent of Teleperformance, 29th capitalization of the CAC 40. S&P, more than 300 companies enjoy a higher valuation. The economic weight of Russian companies therefore remains very limited.
The panorama of the largest Russian listed companies (and the Russian trade balance) also lead to the observation that the local economy is ultra-dependent on raw materials (oil, gas, metals but also cereals), which is typical of emerging economies . Just like the weakness of the technological compartment, whose main representatives (recently integrated into the Moex) Mail.ru (electronic message) or Ozon (e-commerce) display respectively 1.7 and 4.2 billion euros in valuation. The “Russian Google” Yandex, the only technology stock in the MSCI Russia Index (26 stocks), finally has a capitalization of 16.2 billion euros – exactly 100 times less than the Californian technology giant to which it is compared .
Quentin Soubranne – ©2022 BFM Bourse