Russian Equities Weekly 16–20/12/2019: Emerging markets ascend

The Russian equity market rose for the second consecutive week in the line with other emerging markets (EM).

  Week YTD
RTS Total return (TR) in USD 1.9% 53.0%
MOEX index TR in RUB    
Composite 1.1% 36.6%
Blue chip 1.4% 40.4%
Small and mid-cap -0.3% 13.6%
MOEX sector indices TR in RUB
Power Utilities 1.9% 32.1%
Oil & Gas 1.2% 33.9%
Metals & Mining 0.9% 19.8%
Financial Services -0.9% 32.1%
Consumer Goods -1.9% 11.0%
FX    
RUB/USD 0.9% 11.1%
RUB/EUR 1.4% 15.1%
Data as of December 20, 2019
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

The Russian equity market rose for the second consecutive week in the line with other emerging markets (EM). The RTS index gained 1.9%, while the MSCI EM index rose by 2.0% (all figures in USD terms). Positive sentiment over the phase one deal between the US and China has risen risk appetite among investors. According to EPFR Global, the EM equities saw the highest weekly net inflows over almost two years, amounted to USD 4.8 billion.

The power utilities sector outperformed the broader market, mainly driven by RusHydro, Rosseti, and Inter Rao whose shares rose by 5.9%, 5.6%, and 5.3%, respectively, despite the lack of fundamental news.

The consumer goods sector lagged the wider market, mainly due to M.Video, whose shares lost 14.7% on the news that the interior ministry and the Federal Security Service conducted searches in offices of the company’s main shareholder Gutseriyev family. Mr. Gutseriyev later denied the information about the searches.

Main Russian news

Key macroeconomic indicators remained mixed in November. Industrial production slowed due to the sharp slowdown in manufacturing. Meanwhile the extraction accelerated on the back of better production of coal and metals. The acceleration of growth in retail sales showed in both food and non-food segments. Rosstat published real wages for October, which rose to 3.8% YoY vs 3.4% YoY in September.

Indicator Growth YoY
October 2019 November 2019
Industrial production 2.6% 0.3%
Manufacturing 3.7% 0.1%
Extraction 0.9% 1.4%
Retail sales 1.6% 2.3%
Food 1.3% 1.6%
Non-food 2.0% 3.0%
Real wages 3.8% not available

Russia and Ukraine reached an agreement on gas transit. The current contract expires on December 31, and gas supplies to Europe through Ukraine could be disrupted the next year without the agreement. The new deal will last for five years and guarantees 65 billion cubic meters of Russian gas deliveries via Ukraine next year and 40 billion cubic meters annually from 2021 through 2024. The deal implies the possibility of extending a new transit contract for 2025–2034 under the same conditions.

In addition, the parties settled the claims of Ukrainian Naftogaz to Gazprom. According to the agreements, Gazprom will pay the Ukrainian side $2.9 billion. Naftogaz, in turn, will drop remaining USD 12 billion claim against Gazprom.

To watch…

There is no significant news to follow this week.

 

Author: Marina Tsutskiridze, Junior Investment Specialist

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

Russian Equities Weekly 23 December 2019
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