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Russia’s back to ‘normal’ volatility: Moscow Exchange CFO

Russian volatility back to ‘normal’: Moscow Exchange CFO

Russia is heading back to "normal" levels of volatility following a ruble rollercoaster ride over the past 12 months and in spite of technical problems, the chief financial officer of the Moscow Exchange told CNBC.

Speaking to Squawk Box Europe, CFO Evgeny Fetisov said he was very happy with the bourse's second-quarter results, adding that while the business benefits from volatility, it looked like market fluctuations are starting to slow.

The exchange posted a 16.7 percent fall in net profit from the first quarter to 6 billion rubles ($87,600) compared to a year-on-year rise of 72.8 percent.

"Actually, in Russia we're coming back to, I would say, "normal levels" of volatility in comparison to what we had at the end of last year," Fetisov said, referencing a dramatic 15 percent fall in the ruble against the U.S. dollar last December, hitting an all-time low of 80 rubles to the greenback.

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August figures for the exchange show a sharp rise in trading volumes, however, with derivative trading up over 200 percent from a year earlier, currency trades up 86.7 percent and equity trades up 17.4 percent.

The increase in Moscow's trading activity is set against a backdrop of global markets reeling from a selloff sparked by fears of an economic slowdown in China — an increasingly important trade partner for Russian businesses as sanctions put a strain on relations with the west.

However, Fetisov played down the company's exposure to China, saying it was another piece to their portfolio helping to diversify revenue streams, and went on to say that western sanctions over the conflict in Ukraine weren't reason to worry.

A man walks past a board showing currency exchange rates in Moscow, July 28, 2015.
Sergei Karpukhin | Reuters

He explained that their two flagship services, money markets and the currency exchange, were domestically driven and didn't rely on foreign cash as much as equities and derivatives which see international investment account for 40 to 45 percent of trade.

And while many investors see Russia's economic prospects closely linked to oil prices which have slumped over 50 percent in the past 12 months, he said it would be a mistake to overlook how Russia's economy has evolved.

"Markets overreact to the oil price and they overestimate Russia's link to the oil price….1998 was a great example of how Russia was dependent on oil. Right now the economy is roughly 10 times bigger, the share of non-oil exports have actually surpassed the size of the oil exports in, say, 1998, so it's much more resilient."

Still, it might not be the best time for Russian businesses to go public. Only two companies managed to list on the Moscow Exchange throughout the second quarter.

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"The market is still not there for Russian companies yet," Fetisov said. "But as we see, those IPOs...were actually supported predominantly by the local investors, which is a very good sign for us."

It's that local support that Fetisov is banking on to support Russian markets. Pointing to a report released by the All Russian Centre for Public Opinion Studies (VTsIOM) released earlier this summer, the CFO explained 55 percent of Russians don't follow the exchange rate as closely as they have in the past.

"They do [care] but to the far lesser extent, I think the economy has become a ruble economy rather than say the dollar-linked economy, which it had been 15 years ago."

"They are, actually, very much ruble-focused, and internal economy focused. There's a shift."

Technical glitch

The exchange was hit by a technical glitch Tuesday afternoon which halted trade. A statement on the website cited failure of network equipment at the data centre. It stopped equity, currency and derivative trading though they were preparing to use backup equipment to resume trade at an unspecified time. By 16:50 local time, (14:50 London Time) the exchange resumed trading.

It's the second trading halt to hit the Exchange this month. A spokesperson confirmed to CNBC that the Moscow Exchange that trading stopped for 30 minutes on September 1, though it's yet unclear whether the two incidents are related.