STOCK MARKET WATCH -- Wednesday, 9 July 2014

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26. Stagflation for HSBC Means Russian Ruble Seen Weakening

http://www.bloomberg.com/news/2014-07-09/stagflation-for-hsbc-means-russian-ruble-seen-weakening.html

The weakest pace of economic growth in five years combined with the fastest inflation (RUCPIYOY) in three are prompting the most-accurate ruble forecaster to predict steeper declines for the currency.

The ruble will fall 9 percent to 37.50 by year-end, said Alexander Morozov, chief economist for Russia and the Commonwealth of Independent States at HSBC Holdings Plc, who topped Bloomberg’s ruble-dollar rankings for the four quarters ended June 30. Otkritie Asset Management sees “nothing good” for ruble bonds, which have delivered the worst returns in dollar terms this year among 31 emerging markets tracked by Bloomberg.

Morozov revised his view from an earlier 35.40 per dollar in March as the Ukraine crisis sparked heavier capital outflows in the first half than for all of last year, and deterred local companies from investing. Russia risks joining emerging-market nations facing stagflation, Ksenia Yudaeva, the central bank’s first deputy head, said in January.

“Growing investment risks will lead to a deceleration of capital investments,” Moscow-based Morozov said by phone July 7. “The economic conditions are now worse and we must assume the currency will weaken more than we forecast earlier.”