The dollar-denominated RTS closed at 1,385.81 on Wednesday, down from its recent peak of 1,523.8 on August 4.
“There is a lack of consensus about growth prospects in the US and that is feeding through to Russia,” said Tom Mundy, a strategist at Renaissance Capital.
The oil price fell to $72.50 a barrel following weaker than expected new home sales data in the US, while Russia is experiencing domestic problems.
Following the fires that swept through the country destroying crops and killing over 50 people, the Economic Development Ministry cut its growth forecast by 0.7 per cent.
But while grain price hikes are causing consumer inflation, the equity market has become even cheaper over the last month.
Russian equities currently trade at a price-to-earnings ratio of 5.7, significantly lower than their BRIC peers.
“Russia on a stand-alone looks pretty solid – low valuations, good earnings growth potential … but Russia is still trading around what happens in the rest of the world.
But while poor corporate governance and corruption are often given as reasons for the discount, investment banks are predicting a strong end to the year after GDP growth of 5.2 per cent in the second quarter.
This rebound, however, will be dependent on the oil price holding above $70 a barrel. London-based Capital Economics, say slowing growth in the West could put the brakes on commodities.
“We expect global growth to slow over the next year, particularly in key export markets in Western Europe,” their economists said in a note to investors.
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