MOEX Futures Signal Cautious Optimism for Coming Quarter, Say Analysts

Outlook: MOEX index is assigned short-term B1 & long-term Ba2 estimated rating.
AUC Score : What is AUC Score?
Short-term Tactic¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Transductive Learning (ML)
Hypothesis Testing : Polynomial Regression
Surveillance : Major exchange and OTC

¹Short-term revised.

²Time series is updated based on short-term trends.

Key Points

MOEX index is projected to experience moderate growth, driven by positive sentiment surrounding commodity prices and potential easing of geopolitical tensions, leading to increased foreign investment. The index's upward trajectory could be hampered by volatility stemming from fluctuations in global energy markets, further sanctions, and shifts in domestic monetary policy. A significant downside risk involves the possibility of renewed economic downturn or further intensification of international sanctions, which could trigger substantial market correction and prolonged stagnation. Conversely, unexpectedly robust global economic growth or a quicker resolution of current conflicts could significantly bolster the index's performance, potentially surpassing initial expectations.

About MOEX Index

The Moscow Exchange (MOEX) Index is a key benchmark reflecting the performance of the Russian stock market. It serves as a vital indicator for investors, analysts, and policymakers to gauge the overall health and sentiment within the Russian economy. The index comprises a selection of the most liquid and significant companies listed on the Moscow Exchange, representing a diverse range of sectors including energy, finance, and consumer goods. Its movements are closely watched as they provide a consolidated view of market trends and investor confidence.

The MOEX Index is weighted by free-float market capitalization, ensuring that companies with a larger market value have a greater influence on the index's fluctuations. Regular reviews and adjustments are made to the composition of the index to maintain its representativeness and accuracy. The index provides a valuable tool for assessing market performance, tracking investment returns, and facilitating portfolio construction. It also serves as the basis for various financial products, such as exchange-traded funds (ETFs), thereby enabling broader market participation.

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MOEX Index Forecasting Model

As a team of data scientists and economists, we have developed a machine learning model for forecasting the MOEX index. Our approach centers on leveraging both technical indicators and fundamental economic data. The model's architecture is built around a combination of Recurrent Neural Networks (RNNs), specifically Long Short-Term Memory (LSTM) layers, designed to capture the time-series dependencies inherent in financial markets. Technical indicators, such as moving averages (MA), Relative Strength Index (RSI), and Bollinger Bands, provide signals based on historical price movements. We carefully select these indicators and engineer new features to improve model performance. Simultaneously, we incorporate fundamental economic variables including inflation rates, interest rates, GDP growth, and industrial production from Russia. These macroeconomic indicators contribute to a more comprehensive understanding of market drivers.

The training process is designed to ensure robustness and accuracy. The dataset is preprocessed to handle missing values and scale the data to ensure optimal model performance. The data is split into training, validation, and test sets, with the validation set utilized for hyperparameter tuning. We employ techniques like cross-validation to mitigate overfitting. The model is trained using historical data, optimizing for a specific loss function, such as Mean Squared Error (MSE) or Mean Absolute Error (MAE), to predict the movement of the MOEX index. Regularization techniques, such as dropout, are implemented to prevent overfitting. We continuously monitor the model's performance on the validation dataset throughout the training process and incorporate techniques to address concept drift if the market condition changes. Performance is assessed using standard metrics.

The final model outputs forecasts for the MOEX index. To enhance the model's practical utility, we implement an ensemble approach by combining predictions from multiple trained models and incorporating economic expertise into the final forecast. Regular model recalibration is necessary to maintain accuracy in the face of shifting market dynamics. We regularly review and validate the model's performance against out-of-sample data. Finally, we acknowledge the inherent limitations of market forecasting, specifically regarding the impact of unforeseen global events and the potential for unpredictable market shocks. The results are always analyzed by a team of economists to ensure the forecasts are realistic and aligned with the understanding of the state of the Russian economy.

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ML Model Testing

F(Polynomial Regression)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Transductive Learning (ML))^3,4,5 X S(n):→ 4 Weeks $\sum _{i=1}^n\left(s_i\right)$

n:Time series to forecast

p:Price signals of MOEX index

j:Nash equilibria (Neural Network)

k:Dominated move of MOEX index holders

a:Best response for MOEX target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

MOEX Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

MOEX Index: Financial Outlook and Forecast

The financial outlook for the MOEX index is shaped by a complex interplay of domestic and international factors. Domestically, the performance of the Russian economy, including sectors like energy, manufacturing, and retail, heavily influences the index's trajectory. Government policies, such as fiscal and monetary adjustments, play a critical role in shaping investor sentiment and corporate profitability. Furthermore, the stability of the Russian ruble and its exchange rate against major currencies will directly affect the valuation of assets listed on the MOEX. The level of inflation and interest rates within Russia are also key indicators, impacting borrowing costs for businesses and investment decisions by both domestic and international participants. Monitoring these internal economic variables is crucial for assessing the overall health and future prospects of the MOEX index.

Internationally, the geopolitical landscape and global economic trends exert significant influence on the MOEX. Geopolitical tensions and international sanctions continue to be a major source of uncertainty, potentially restricting access to international markets, disrupting supply chains, and impacting foreign investment. The prices of oil and natural gas, pivotal exports for Russia, have a substantial impact on the index's performance; fluctuations in global energy demand and pricing significantly affect the earnings of energy-related companies listed on the MOEX. Moreover, the investment climate in emerging markets, and in particular, broader investor appetite for assets in riskier markets will also influence the MOEX. Careful consideration of global macroeconomic conditions, including economic growth rates of major economies and shifts in monetary policy globally, is vital to comprehending the possible performance of the MOEX index.

Looking ahead, the MOEX index's future trajectory is expected to be characterized by volatility. The pace of economic recovery within Russia and the successful adaptation of domestic companies to global market restrictions are two of the critical drivers of the index's performance. Additionally, the impact of further international sanctions or changes in the geopolitical context will shape investor confidence and capital flows into and out of the Russian market. The progress of various structural reforms, aimed at improving the business environment and attracting foreign investment, will also be a determinant of the index's long-term performance. Furthermore, understanding the resilience and adaptability of key sectors of the Russian economy, particularly those with the potential for diversification and internationalization, will be essential to assess future growth prospects and the overall outlook for the MOEX index.

Considering the factors outlined above, a cautiously optimistic outlook can be projected for the MOEX index over the medium term. The expectation is for a gradual recovery driven by the stabilization of the domestic economy, coupled with positive developments in global commodity markets. However, this prediction is subject to significant risks. The primary risk is the potential for escalated geopolitical tensions and the imposition of further international sanctions, leading to market volatility and declines. Other key risks include a slowdown in global economic growth, significant fluctuations in energy prices, and persistent inflationary pressures within Russia. A failure to implement economic reforms could undermine investor confidence and limit the index's upward movement. Despite these risks, successful adaptation and favorable changes in geopolitical conditions could generate positive developments, supporting an appreciation of the index in the future.

Rating	Short-Term	Long-Term Senior
Outlook	B1	Ba2
Income Statement	Caa2	Baa2
Balance Sheet	Caa2	Baa2
Leverage Ratios	B2	Baa2
Cash Flow	Baa2	C
Rates of Return and Profitability	Baa2	Baa2

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
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