The record-breaking speed of Russia’s stock market collapse – Russian indices almost halved within hours of Thursday’s invasion – confirms many investors didn’t believe things would get this bad, this quickly.
Indeed, many investors were buying prior to the invasion, with TrackInsight data showing above-average inflows into Russian equity ETFs.
"Buy Russia, it's cheap," headlined MoneyWeek less than a week before the collapse. On Tuesday, Jeroen Blokland of True Insights similarly noted the MSCI Russia index was trading on only four times estimated earnings.
“Should matters de-escalate,” added Blokland, “Russian equities will skyrocket.”
Unfortunately, they didn’t de-escalate – they escalated to nightmarish levels.
Commentators arguing Russian stocks were cheap weren’t wrong – they have been cheap for years. In 2016, in an article discussing the world’s cheapest markets, I commented that Russia “looks extremely cheap – worryingly cheap, some might say”.
Last week, Russian stocks fell to levels unseen since 2016. Sometimes, dirt-cheap valuations aren’t an invitation to buy – they’re a warning that risks are very, very high.
