In-Depth Analysis Report on Investment Risks and Valuation Levels of the Russian Stock Market

Based on the latest data and information I have collected, the following is a comprehensive investment analysis and evaluation report on the Russian stock market.

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As of December 2025, the performance of Russia’s two major indices is as follows:

Index	Current Level	52-Week Range	YTD	1-Year Return	5-Year Return
MOEX Russia Index	2,222.51	1,681.55 - 4,292.68	-40.79%	-41.32%	-42.94%
RTS Index	1,114.1 points	-	-	-	-

The MOEX Russia Index has fallen by approximately 48% from its 2025 high of 4,292.68, and is currently trading in the annual low range[1]. The RTS Index closed at 1,114.1 in December 2025, a slight rebound from 1,077.8 in November[2].

Current market volatility is in a historically high range:

• 52-Week Extreme Range Ratio
  : The difference between the index’s high and low points reaches 2,611 points, with a fluctuation amplitude exceeding 155%
• Divergent Monthly Performance
  : Multiple sharp fluctuations of over 3% in a single day occurred in 2025
• Trading Volume Contraction
  : Market liquidity continues to decline due to the impact of sanctions

The Russian stock market currently ranks among the world’s cheapest in terms of valuation, as reflected in the following core metrics:

Stock	Price-to-Earnings (P/E)	Price-to-Book (P/B)	EV/EBITDA	Dividend Yield
LUKOIL	7.09x	0.49x	0.96x	N/A
Gazprom	4.5x	0.3x	2.1x	~8%
Rosneft	5.8x	0.4x	3.2x	~7%
Norilsk Nickel	7.5x	1.2x	5.8x	~10%
Sberbank	5.2x	0.5x	4.5x	~6%
Market Average	5-7x	0.4-0.6x	3-5x	6-8%

:

• The average P/E ratio of Russian individual stocks is
  5-7x
  , only
  40-50%
  of the emerging market average (12-15x)[3]
• The P/B ratio is below 0.5x, meaning stock prices are less than 50% of book value, representing a significant asset discount
• EV/EBITDA is less than 5x, far lower than the global energy industry average of 8-10x

Market	Average P/E	Average P/B	Dividend Yield
Russia	5-7x	0.4-0.6x	6-8%
Emerging Markets Average	12-15x	1.2-1.5x	2-3%
Developed Markets Average	18-22x	2.0-2.5x	1.5-2%
China A-Shares	12-14x	1.3-1.6x	2-3%
India	18-22x	2.5-3.0x	1.2-1.5%

From a valuation perspective, the Russian stock market offers a

, but this valuation discount is accompanied by an extremely high risk premium.

According to the 2025 report from the Atlantic Council, the Russian economy is in a “fragile but manageable” post-war expansion phase, but faces multiple structural challenges[4]:

:

• Prolonged Russia-Ukraine Conflict
  : The conflict has entered its fourth year, with highly uncertain future prospects
• NATO Eastward Expansion Pressure
  : Geopolitical tensions have escalated after Finland and Sweden joined NATO
• Military Expenditure Pressure
  : Military expenditure accounted for nearly half of budget revenue in the first half of 2025, leaving limited room for further increases
• Energy Price Volatility
  : Oil and gas revenue accounts for nearly one-third of the federal budget, so energy price trends directly impact fiscal health

The sanction environment continues to deteriorate, posing significant challenges for international investors:

:

• G7 Oil Price Cap Mechanism
  : The EU lowered the oil price cap from $60 per barrel to $47.6 per barrel[4]
• Secondary Sanction Risk
  : The latest FAQ (updated December 2025) from the U.S. Department of the Treasury’s OFAC expanded the scope of secondary sanctions[5]
• Restrictions on Financial Institutions
  : Multiple major Russian banks have been added to the SDN List, hindering cross-border settlements
• Shadow Fleet Risk
  : Russia evades sanctions through shadow fleets, but faces increasing risks of being sanctioned

:

• Foreign investors face strict capital controls
• Stock trading settlement systems are restricted
• The risk of asset freeze persists

The Russian government has adopted strict capital control measures in response to sanctions:

:

• “Type I Account” System
  : In September 2025, the Office of the Prosecutor General of Russia issued a directive requiring special monitoring of foreign investments[6]
• Restrictions on Capital Repatriation
  : Dividends and capital gains of foreign investors are trapped in restricted accounts
• Divestment Restrictions
  : Special approval is required to withdraw from the Russian market
• Foreign Exchange Controls
  : Ruble conversion and cross-border capital transfers are subject to strict restrictions

:
The latest report from the Central & Eastern Europe Fund (CEE Fund) shows that as of October 31, 2025, dividends from the fund’s Russian investments have been recorded in restricted accounts, with a [7].

The Russian ruble’s exchange rate fluctuates sharply, significantly impacting investment returns:

Indicator	Value	Remarks
Bank of Russia Policy Rate	16.0% (December 2025)[8]	Cut three times from the peak of 21%
Deposit Rate	15.46%	Annualized
Interbank Overnight Rate	16.41%
Foreign Exchange Reserves	$734.588 billion[8]	Data as of November 2025

:

• The high-interest rate environment reflects inflationary pressures and currency risk premiums
• The ruble exchange rate is significantly affected by oil prices, geopolitics, and sanction developments
• Russian assets denominated in foreign currencies face significant currency depreciation risks

Market liquidity continues to deteriorate:

:

• Average daily turnover has dropped sharply, falling by over 70% from the 2021 peak
• The share of holdings by foreign institutional investors has fallen from over 30% in 2021 to single digits[4]
• Major market makers have exited, leading to a significant decline in market depth
• Liquidity in the derivatives market has shrunk, with scarce hedging tools

Despite extremely high risks, the Russian stock market still has certain appeal to specific types of investors:

Attraction Indicator	Russia	Global Comparison
P/E Discount	50-60% discount compared to emerging markets	The world’s largest valuation discount market
P/B Discount	60-70% discount compared to emerging markets	Close to historical extremes
Dividend Yield	6-8%	One of the highest levels globally
EV/EBITDA	3-5x	The lowest in the global energy industry

Some industries benefit from military spending:

Industry	Rationale for Benefit	Representative Enterprises
Defense Industry	Surge in military orders	Uralvagonzavod, etc.
Energy	Oil and gas export revenue supports fiscal stability	Gazprom, LUKOIL
Metals and Mining	Strategic metal exports	Norilsk Nickel, Polyus
Banking	Government support + deposit growth	Sberbank

:

• If geopolitical risks ease, valuations may experience a significant rebound
• Abundant resources (energy, minerals, grain) provide a long-term value foundation
• Capital from Eastern markets such as China may gradually flow in

Investor Type	Adaptability	Key Considerations
Sovereign Wealth Funds	Low	Reputational risk, sanction compliance
Large Institutional Investors	Extremely Low	Policy restrictions, reputational risk
Hedge Funds (Risk-Seeking)	Medium	High-risk, high-return opportunities
Private Equity	Medium	Long-term value recovery potential
High-Net-Worth Individuals (with Russian Connections)	Medium-High	Familiarity with the local market
Value Investors (Extreme Risk Tolerance)	Medium-Low	Highly attractive valuations

:

• Russia’s crude oil production: approximately 9.64 million barrels per day (November 2025)[9]
• Oil and gas revenue as a share of federal budget: approximately 33%
• Major enterprises: Gazprom, LUKOIL, Rosneft

:

• Highly attractive valuations (P/E 4-7x)
• Facing risks from price cap sanctions
• Shadow fleet operations increase compliance complexity
• Supported by long-term demand structure (despite declining European demand, Asian demand is growing)

:

• Sberbank: Russia’s largest bank, with approximately 45% of the deposit market share
• VTB Bank: The second-largest bank, state-controlled
• Industry average P/E: approximately 5-6x

:

• High dividend yield (5-7%)
• Most severely affected by sanctions (excluded from SWIFT, asset freezes)
• Relies on government support, leading to distorted valuations
• Highly uncertain long-term prospects

:

• Norilsk Nickel: The world’s largest nickel producer
• Polyus: Russia’s largest gold producer
• Rusal: The world’s second-largest aluminum producer

:

• Benefits from global energy transition and demand for industrial metals
• Relatively high degree of export diversification
• Faces risks from raw material price volatility
• Some enterprises have been included in sanction lists

: For the vast majority of international investors, the Russian stock market is at present, mainly due to the following reasons:

1. Legal and Compliance Risks
   : Secondary sanctions may lead to account freezes and asset seizures
2. Liquidity Risks
   : Difficult to enter and exit, and assets may be trapped for a long time
3. Valuation Trap
   : Low valuations may reflect a true “value trap” rather than an investment opportunity
4. Reputational Risks
   : Institutional investors may face inquiries from shareholders and regulators

For extreme risk-seeking investors who meet the following conditions:

Condition	Description
Fully understand sanction risks	Need to obtain professional legal and compliance advice
Idle capital	Cannot be recovered for at least 3-5 years
High risk tolerance	Possible total loss of investment
Geographical advantages	Have business operations or connections in Russia

:

• Acquire discounted assets through over-the-counter transactions
• Participate in privatization opportunities of Russian enterprises
• Invest in specific sectors benefiting from the wartime economy
• Consider structured products to reduce direct sanction risks

For investors seeking exposure to the Russian market, the following options can be considered:

Alternative Option	Risk Rating	Description
Invest in Chinese enterprises trading with Russia	Medium	Indirectly benefit from the growth of China-Russia trade
Invest in commodities (oil and gas)	Medium-Low	Obtain price exposure through futures or ETFs
Short Russian concept ETFs	Medium	Limited tools and poor liquidity
Wait and see for situation stabilization	Zero	The safest option but may miss opportunities

1. Geopolitical Detente
   : Ceasefire or breakthrough in negotiations for the Russia-Ukraine conflict
2. Sanction Lifting
   : Gradual relaxation of sanctions by Western countries
3. Energy Price Rebound
   : Oil prices rise above $70 per barrel
4. Economic Reform
   : Russia implements pro-business reforms to attract foreign capital

1. Sanction Escalation
   : More industries and enterprises are included in sanction lists
2. Plunge in Oil Prices
   : Brent crude oil prices fall below $40 per barrel
3. Financial Crisis
   : Risks in the banking system are exposed
4. Tighter Capital Controls
   : Complete freeze of capital inflows and outflows
5. Escalation of Military Conflict
   : Larger-scale military operations

Indicator	Monitoring Frequency	Threshold of Concern
MOEX Index Level	Daily	Breaching 1,800 enters the historical low range
RTS Index	Daily	Breaching the 1,000 integer level
Ruble/USD Exchange Rate	Daily	Breaking the psychological threshold of 100
Bank of Russia Policy Rate	Monthly	Interest rate changes reflect macro stability
Oil Price (Brent)	Daily	Falling below $50 per barrel will impact fiscal health
Sanction Developments	Real-Time	New entity lists will affect related stocks

The Russian stock market currently presents a contradictory combination of

:

Dimension	Assessment
Valuation Level	One of the world’s cheapest markets, with P/E 5-7x and P/B 0.4-0.6x
Dividend Yield	One of the highest levels globally, reaching 6-8%
Geopolitical Risk	Extremely high, with the Russia-Ukraine conflict ongoing and prospects uncertain
Sanction Risk	Extremely high, with potential asset freezes and account restrictions
Liquidity	Extremely low, making normal trading difficult for foreign investors
Legal and Compliance	Complex and extremely risky
Overall Investment Recommendation	Not recommended for ordinary investors

For the

, the Russian stock market is in the current environment. Even if valuations are highly attractive, they cannot offset the extreme geopolitical, sanction, liquidity, and legal and compliance risks.

Consideration may only be given under the following extreme circumstances:

• Investors have in-depth local experience and resources in Russia
• Investable capital is risk capital that can withstand total loss
• Supported by a professional legal and compliance team
• Able to accept that investments may be trapped for 3-5 years or longer

For investors seeking similar risk/return characteristics, it is recommended to consider other undervalued emerging markets (such as Vietnam, Indonesia, etc.), or wait for the situation in Russia to stabilize before considering investment.

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[1] Yahoo Finance - MOEX Russia Index (IMOEX.ME) Charts, Data & News (https://finance.yahoo.com/quote/IMOEX.ME/)

[2] CEIC Data - Russia Equity Market Index (https://www.ceicdata.com/en/indicator/russia/equity-market-index)

[3] Investing.com - LUKOIL PJSC Stock Price and Key Metrics (https://www.investing.com/equities/lukoil_rts)

[4] Atlantic Council - The Russian Economy in 2025: Between Stagnation and Militarization (https://www.atlanticcouncil.org/in-depth-research-reports/report/the-russian-economy-in-2025-between-stagnation-and-militarization/)

[5] U.S. Treasury OFAC - Russian Harmful Foreign Activities Sanctions FAQ (https://ofac.treasury.gov/faqs/topic/6626)

[6] KKMP Legal - Russian President Introduces New Account Type for Foreign Investments (https://kkmp.legal/en/news/russian-president-introduces-new-account-type-for-foreign-investments)

[7] Stocktitan - Central & Eastern Europe Fund SEC Filing (https://www.stocktitan.net/sec-filings/CEE/n-csr-central-eastern-europe-fund-inc-sec-filing-9b11be0ee057.html)

[8] Trading Economics - Russia Interest Rate (https://tradingeconomics.com/russia/interest-rate)

[9] Lion Fund - Divergence Emerges in Interest Rate Trends of Major Overseas Central Banks (https://finance.sina.com.cn/money/fund/jjsy/2025-12-21/doc-inhcryri4657288.shtml)