The Russian equity market rose last week, but underperformed other emerging markets (EM). The RTS index gained 0.9%, while the MSCI EM index rose by 1.5% (all figures in USD terms). Markets were supported by optimistic news around a possible US-China trade agreement to roll back some import tariffs.

  Week YTD
RTS Total return (TR) in USD 0.9% 46.7%
MOEX index TR in RUB    
Composite 1.5% 34.0%
Blue chip 1.5% 37.5%
Small and mid-cap 1.7% 11.7%
MOEX sector indices TR in RUB
Power Utilities 2.4% 25.8%
Consumer Goods 2.3% 9.4%
Financial Services 2.3% 28.4%
Oil & Gas 1.8% 34.4%
Metals & Mining 0.1% 15.4%
FX    
RUB/USD -0.4% 8.5%
RUB/EUR 0.7% 12.7%
Data as of 8 November 2019
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

The Russian equity market rose last week, but underperformed other emerging markets (EM). The RTS index gained 0.9%, while the MSCI EM index rose by 1.5% (all figures in USD terms). Markets were supported by optimistic news around a possible US-China trade agreement to roll back some import tariffs. During the week, both indices rose steadily, but corrected on Friday after US President Donald Trump cooled expectations of tariffs cuts. Nevertheless, EM equities, and Russian stocks in particular, ended the week in the black. According to EPFR Global, fund flows into Russian equites amounted to USD 50 million, which was 2.5 times higher than a week ago.

The power utilities sector outperformed the broader market. This was mainly due to RusHydro, OGK-2 and Inter RAO, whose shares rose by 5.6%, 5.2%, and 3.4%, respectively, in USD terms. Despite a lack of fundamental news, these stocks rose on the back of generally positive investor sentiment on rouble assets.

Metals and mining was the week’s worst performer, dragged down mainly by Polymetal and Polyus Gold. The shares lost 5.5% and 2.8%, respectively, in USD terms, due to a drop in the price of gold.

Main Russian news

Inflation in Russia continued to slow. Consumer price inflation (CPI) slipped to 3.8% YoY at the end of October from 4.0% at the end of September. Inflation slowed in the food, non-food and services sectors. Non-food inflation fell to 3.2% YoY vs. 3.4%. Food inflation slipped to 4.2% YoY from 4.6%. Services inflation fell to 3.8% YoY after 4.0%. The Ministry of Economic Development expects inflation to slow further in November, to 3.5%-3.6% YoY. At the end of the year, inflation is forecast to reach 3%-3.3%.

The Central Bank of Russia (CBR) approved the forecast for 2019 GDP growth of 0.8%-1.3%. The regulator said that a gradual acceleration of economic growth is expected only in the first quarter of 2020 due to increased budget spending. The most significant effect on economic performance from national projects is expected after 2022.

To watch…

Rosstat is due to publish its preliminary assessment of GDP performance in Q3 of 2019.

 

Author: Marina Tsutskiridze, Junior Investment Specialist

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

Russian Equities Weekly 11 November 2019
Categories: Market Pulse