The Russian stock market is going through a challenging phase, and the sentiment among market participants can hardly be called optimistic. In a recent interview, Olga Shishlyannikova, Director of the Department of Investment Financial Intermediaries at the Bank of Russia, provided a detailed analysis of the current situation, dispelling myths about a "casino" and outlining the real reasons behind the pressure on stock prices.
The key factor shaping the gloomy backdrop remains the extremely tense geopolitical environment. The second significant trigger, in my assessment, is the persistent inflationary risks that continue to pressure the country's economy. These macroeconomic conditions form the fundamental basis for a decline in risk appetite.
Technical and economic reasons for the downturn
In addition to the general macroeconomic conditions, purely technical factors also affect stock prices. Among them is the dividend gap, when a security becomes cheaper after the ex-dividend date by the amount of the payout to shareholders. This process is natural and expected, but it adds volatility in the short term.
Another technical factor is the forced closure of positions held by retail investors using leverage. When prices fall, such positions can be closed automatically and temporarily amplify the decline.
Economic reasons related to market isolation deserve special attention. Russian companies, deprived of access to foreign investment, are forced to increase debt, but not all manage to service it. Defaults, although they affect issuers outside the top tier, undermine confidence in certain sectors and create additional pockets of nervousness.
The market is not a roulette wheel
The comparison of the stock exchange to a gambling establishment, which became popular after a series of "black swan" events, does not hold up to scrutiny. The regulator's representative acknowledged that events such as the blocking of client assets in 2022 and the imposition of sanctions against financial market participants were indeed difficult to predict. However, this does not make the market chaotic.
A casino is a sequence of random events without cause-and-effect relationships: a bet, a wheel, a ball — and that's it. The market, however, operates on different principles and follows patterns that can be analyzed and calculated. At the same time, the higher the promised return, the higher the risks for the investor.
For a careful observer who follows the economy and business activity, forecasting the course of events is quite realistic. It is precisely a thorough assessment of risks, in my conviction, that helps minimize losses during periods of high volatility.
AI: a helper, but not a replacement
The fashion for artificial intelligence has reached finance, but talk of fully replacing humans is premature. When algorithmic trading with good results emerged, many also decided that the exchange could do without people, but that did not happen. Shishlyannikova cited a telling example of AI's limitations: the assistant could not suggest how to set the clock on a new microwave, forcing her to figure out the instructions on her own.
The Bank of Russia is closely monitoring AI practices and has developed a code of ethics for market participants to ensure the safe use of the technology and data protection. About two-thirds of financial organizations already use or plan to implement AI, but those who use it admit that results still have to be double-checked manually.
AI significantly boosts productivity through routine operations, but so far it does not relieve humans of intellectual work. In my understanding, the key value of an analyst — the ability to interpret data and make decisions in non-standard situations — will remain in demand for a long time to come.
My conclusion: the current correction is not a collapse of the system, but a natural reaction to a set of external and internal challenges. For investors who can separate the wheat from the chaff and analyze fundamental factors, the market still offers opportunities, not just risks.