Russian Equities Weekly 21–25/10/2019: Decisive key rate cut

  Week YTD
RTS Total return (TR) in USD 4.9% 42.0%
MOEX index TR in RUB    
Composite 4.4% 29.5%
Blue chip 5.1% 32.5%
Small and mid-cap -0.3% 7.9%
MOEX sector indices TR in RUB
Oil & Gas 6.9% 30.5%
Financial Services 0.8% 24.2%
Consumer Goods 0.1% 3.8%
Metals & Mining 0.0% 10.8%
Power Utilities -0.1% 24.0%
RUB/USD -0.1% 8.4%
RUB/EUR 0.0% 11.9%
Data as of October 25, 2019
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

The Russian equity market rose strongly over the last week, outperforming other emerging markets (EM) for third week in a row.

The RTS gained 4.9%, while the MSCI EM index rose by 1.2% (all figures in USD terms). Russian market outperformed on the back of 50bp key rate cut by the Russian Central Bank and the 29% rise of Surgutneftegaz shares on the rumours that the company is planning to purchase stake in Lukoil.

The oil and gas sector outperformed the market. This was mainly due to Surgutneftegaz shares. Other best performers in the sector were Gazprom and Lukoil, whose shares rose by 8.2% and 6.9% respectively, in USD terms. Gazprom shares rose despite the lack of market moving news. Lukoil announced new dividend policy that implies at least 100% of FCF going to dividend pay-outs.

The power utilities sector was the worst performer of the week, dragged down mainly by FGC UES. There was no fundamental news to justify the poor performance of the company’s stocks.

Main Russian news

The Central Bank of Russia (CBR) announced a key rate cut to 6.5%.

It was the fourth time this year that the CBR has cut the rate. The regulator noted, that inflation slowdown is overshooting the expectations, and the annual inflation forecast for 2019 is lowered from 4.0-4.5% to 3.2-3.7%. Thus, this time the CBR had to make more decisive move and cut the key rate by 50 bps and left a room for one more possible cut this year. The next meeting to review key rate is planned for 13 December 2019.

At the same time, the CBR has left the 2019-2022 economic growth forecast unchanged. According to the regulator, the GDP growth rate will gradually increase from 0.8-1.3% in 2019 to 2-3% in 2022.

To watch…

There is no significant news due this week.

Author: Marina Tsutskiridze, Junior Investment Specialist

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

Russian Equities Weekly 28 October 2019
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