Experts assessed the reaction of financial markets to the conversation between Putin and Trump

The reaction of the financial market to the geopolitical events of recent days, including the conversation between Russian President Vladimir Putin and his American counterpart Donald Trump, is rather neutral, but increased volatility has not been avoided. Kirill Tachennikov, Director of the analytical department of the Sinara Investment Bank, shared this opinion with Izvestia on May 20.

"Investors have overestimated the likelihood of a quick resolution of the conflict, and in a situation of ultra-high ruble rates on the market, not everyone is ready to maintain long positions in stocks for a long time. The ruble exchange rate is now generally more determined by the offshore market outside the Russian Federation, which is influenced by a large number of factors, not just geopolitics," he said.

The expert suggested that in the near future, the Moscow Exchange index will trade in the range of 2780-2950 points, which has been in recent weeks. He added that the Central Bank's decision on the rate on June 6, as well as the announcement of dividends by some issuers and corporate reporting, could have an impact on market dynamics. A weakening ruble or rising commodity prices may also have a positive impact on the shares of exporters.

"For the ruble, the range of 79-86 rubles per US dollar is most likely on the horizon per month. A more significant weakening is unlikely, as the factors that led to its strengthening (the repatriation of previously "stuck" export earnings, capital inflows from friendly non—residents, high ruble rates) remain in force for now," the expert said.

Nevertheless, Tachennikov noted, the growing activity of importers, the thinning of the canopy from previous years' revenues, as well as the decline in export revenues of the current period against the background of lower oil prices should at some point weaken the Russian currency somewhat.

At the same time, Stanislav Kleshchev, investment strategist at VTB broker My Investments, told Izvestia that the impact of geopolitical events on investor behavior in the Russian financial market is noticeably decreasing.

"This is due, among other things, to the completion of the formation of a new market structure — with the predominance of retail investors and minimal participation of non—residents," he explained.

Interim pretexts: how is the dialogue between Russia and the United States progressing

The parties will continue to discuss the full—fledged work of the diplomatic missions, but negotiations on the Black Sea Initiative are on hold.

According to Kleshchev, with a key rate of 21%, the current discount in the valuation of Russian stocks does not look excessive: the P/E multiplier remains at 4.6x against historical 6.5x.

"The CNY/RUB exchange rate (yuan/ruble. — Ed.) has been demonstrating extremely low volatility for about two months, staying in a narrow range of 11.00–11.50 rubles. The ruble continues to be supported by a high key interest rate and the limited capacity of large participants to store foreign currency liquidity abroad in the face of sanctions pressure," the expert said.

However, Kleshchev noted, there is also a factor working against the ruble — lower oil prices. This is due to the fact that OPEC+ countries have begun to actively increase production in an effort to regain lost shares in the global market. Against the background of rising inflation and foreign trade conditions, the current ruble exchange rate is estimated to be overextended by about 15%.

"The transition to more balanced exchange rates is complicated by the continuing gap in money market rates: in China they remain close to zero, while in Russia they exceed 21%. This makes the ruble attractive for placing funds and restrains its weakening, despite the fundamental prerequisites," the expert concluded.

Putin and Trump had a telephone conversation on May 19 that lasted more than two hours. During the conversation, they discussed, among other things, the settlement of the conflict in Ukraine. The Russian president called the conversation informative, frank and useful.