Russian Equities Weekly 08–12/07/2019: Approaching the inflation target

  Week YTD
RTS Total return (TR) in USD -0.1% 34.7%
MOEX index TR in RUB    
Composite -1.3% 21.6%
Blue chip -1.3% 24.0%
Small and mid-cap -0.9% 12.6%
MOEX sector indices TR in RUB
Consumer Goods 0.9% 13.0%
Financial Services 0.6% 25.8%
Oil & Gas -1.7% 14.6%
Metals & Mining -2.1% 6.9%
Power Utilities -2.1% 26.3%
RUB/USD 1.3% 9.9%
RUB/EUR 0.7% 11.9%

Data as of July 12, 2019
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

Last week, the Russian equity market outperformed other emerging markets (EM). The RTS lost 0.1% while MSCI EM index fell by 0.8%. Global markets were affected by mixed signals from the US. China was not delivering on new commitments regarding the US agricultural products. On the other hand, more Fed officials made dovish comments about monetary policy. Russia outperformed broader EM indices possibly due to the good inflation data that was posted last week. Inflation has approached the Central Bank of Russia’s (CBR) target, which likely supports the possibility of a further key rate cut in July.

The consumer goods sector outperformed the market. This was mainly due to Yandex and Lenta, whose share prices rose by 3.7% and 4.2%, respectively, (all figures in rouble terms). Both companies outperformed despite the lack of fundamental news.

The power utilities sector was the worst performer of the week, dragged down mainly by Rosseti and OGK-2. There was no official news to explain Rosseti’s poor performance. OGK-2 disclosed its plan to sell 3.89% of its treasury stake in Mosenergo and to purchase a 0.35% interest in Mosenergo.

Main Russian news

Inflation in Russia continued to slow. The consumer price index (CPI) slipped to 4.7% YoY as at the end of June from 5.1% YoY at the end of May. Inflation slowed in the food, non-food and services sectors. Non-food inflation fell to 3.5% YoY vs. 3.8% YoY. Food inflation slipped to 5.5% YoY vs. 6.4% YoY. Services inflation fell to 4.9% YoY vs. 5.1% YoY. Inflation has approached the upper boundary of the CBR’s 4.2%-4.7% range for this year, so this may support another key rate cut at the next CBR meeting.

The CBR announced data related to the federal budget. Federal budget revenue in June was 1.8% YoY lower than in June 2018, mainly due to lower oil prices.  Revenues reported for the first half of 2019 rose 10.7% YoY. Non-oil and gas revenue increased by 15.7% YoY in the first half of 2019. This was mainly due to an increase of 17.5% in Value Added Tax collections after the VAT rate was hiked from 18% to 20% in January 2019.

To watch…

Rosstat is due to publish the key macroeconomic figures for June 2019.

Author: Aleksandra Kuznetsova, Junior Investment Specialist

Sources: Vedomosti, Rosstat, Bloomberg, TKB Investment Partners (JSC); July 2019

Russian Equities Weekly 15 July 2019
Previous Story

Russian Equities Weekly 01–05/07/2019: Leading the emerging markets

Next Story

Russian Equities Weekly 15–19/07/2019: Strengthening macroeconomic indicators