|RTS Total return (TR) in USD||-3.9%||22.4%|
|MOEX index TR in RUB|
|Small and mid-cap||-2.5%||7.8%|
|MOEX sector indices TR in RUB|
|Metals & Mining||-1.9%||4.5%|
|Oil & Gas||-2.6%||10.9%|
Data as of August 16, 2019
Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging markets (EM). The RTS index lost 3.9% while MSCI EM index lost 1.0% (all figures in USD terms). The Russian market’s underperformance was mainly due to the rouble weakening by 1.9% against the US dollar. This can be explained by:
- Currency market concerns regarding Russia’s trade balance, which fell by 6.4% YoY over the period January-July 2019 due to export growth being slower than import growth. The Central Bank of Russia published this estimate on 9 August.
- Q3 is normally a relatively unfavourable period for the rouble due to dividends payments, relatively low demand for Russian gas in Europe and it being the peak tourist season.
As for the factors directly related to Russian equities – we continue to see profit-taking.
The consumer goods sector was the best performer, mainly due to X5 Retail Group and Lenta, whose share prices rose by 3.0% and 2.0%, respectively, in rouble terms. X5 rose on the back of strong Q2 2019 IFRS results. Its gross margin increased to 25%, up by 1% YoY, mainly due to improved logistics and fewer damaged returns. Lenta’s share price rose despite the lack of market-moving news.
The financial services sector was the worst performer of the week, dragged down mainly by VTB and Moscow Exchange. There was no fundamental news to justify the poor performance of these stocks.
Main Russian news
Industrial production weakened in July, rising by 2.3%YoY after 3.3% YoY in June. This was mainly due to a slowdown in manufacturing which rose by 2.8%YoY vs 3.4% in June. The slight acceleration in minerals extraction failed to compensate for this. Extraction growth in July was 3.0%YoY vs. 2.3%YoY in June. Other key macroeconomic figures will be available later this week.
Rosstat posted the preliminary Q2 2019 GDP growth estimate at 0.9% YoY. This is 0.4% higher than in the first quarter. Industrial production rose by 3.0% YoY in Q2 from 2.1% YoY in Q1. Manufacturing output accelerated to 2.4% in Q2 from 1.3%YoY in the previous quarter.
Rosstat is due to post the remaining key macroeconomic figures for July 2019.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Vedomosti, Rosstat, Bloomberg, TKB Investment Partners (JSC); August 2019Russian Equities Weekly 19 August 2019