Russian Equities Weekly 11-15/03/2019: Driven by global rally

Financials outperformed other sectors for the third consecutive week: Safmar Financial Investment and VTB Bank’s shares rose by 10.1% and 6.2% respectively.

The consumer goods sector underperformed. ROS AGRO and X5 Retail Group were the weakest dropping by 4.0% and 3.1% respectively.

Week YTD
RTS Total Return (TR) in USD 1.5% 12.3%
MOEX index TR in RUB
Blue Chip-0.1%5.5%
Small and mid-cap-0.5%2.8%
MOEX sector index TR in RUB
Financial Services
Metals & Mining
Power Utilities
Oil & Gas
Consumer Goods

Data as of March 15th, 2019
Sources: TKB Investment Partners (JSC) calculations; Bloomberg

Main Russian news

S&P Global analysts noted that rouble and the Russian economy as a whole now is less dependent on oil than it was several years ago.

For a long time, the rouble rose and fell in line with oil prices, but this consistent correlation has reduced. In 2018, oil prices rose but the rouble weakened, mainly due to state measures and international sanctions whereby the government diverts excess revenues when oil prices are above $40 per barrel to reserves, and invests these revenues in foreign assets. This meant Russia had a greater resistance to external market events. Currently, the central bank keeps high foreign currency and gold reserves. Fears of sanctions on government debt led to a drop of international investors’ shares in the government bond market in the latter half of 2018, putting pressure on the rouble. To further protect the Russian economy, S&P suggest an increase to net liquid state assets that still constitute less than 10% of GDP, and stimulate non-energy exports.

On March 15, the United States, the EU and Canada announced sanctions on a number of Russian individuals and companies in response to the conflict in the Kerch Strait.

The US sanctions target six Russian individuals, six defense firms operating in Crimea and two energy and construction companies. All companies are non-listed ones. The US Office of Foreign Assets Control noted that these measures freeze the property and interests in property of the designated individuals and companies and trading with them is not permitted. Canada declared that its new regulations impose dealings prohibition on 15 companies and 114 individuals and freeze their asset on its territory. The EU council added eight more Russian military officers and security service officials to the sanction list.

These sanctions have not had a material effect on the market as they seem to be immaterial for the Russian economy overall.

To watch…

X5 Retail Group and FSK are due to publish full-year 2018 IFRS results

OPEC+ meeting in Baku on March 18th

Author: Marina Tsutskiridze, junior investment specialist

Sources: Vedomosti, Bloomberg, OFAC, the European Council, Government of Canada, TKB Investment Partners (JSC); March 2019


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