Russian Equities Weekly 24–28/02/2020: The infection spreads

  Week YTD
RTS Total return (TR) in USD -14.8% -15.8%
MOEX index TR in RUB    
Composite -10.3% -8.3%
Blue chip -10.7% -10.5%
Small and mid-cap -11.0% 1.0%
MOEX sector indices TR in RUB
Financial Services -8.7% -2.9%
Consumer Goods -9.2% -3.3%
Metals & Mining -9.3% -0.2%
Oil & Gas -11.7% -15.2%
Power Utilities -12.2% 6.4%
RUB/USD -4.0% -7.3%
RUB/EUR -5.6% -5.6%
Data as of February 28, 2020
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

Last week, the Russian equity market fell by more than the other emerging markets (EM). The RTS index lost 14.8%, while the MSCI EM index fell by 7.2% (all figures in USD terms). The news that coronavirus Covid-19 has spread globally put pressure on financial markets worldwide. Additional pressure on the Russian market came from Russia-Turkey tensions in Syria on Thursday. Prior to the Idlib incident, the RTS index and MSCI EM index had performed in line, losing 4% by close of trading on Wednesday, despite oil prices dropping by 9%. During Thursday-Friday the RTS index dropped by 11.1% and MSCI Turkey index contracted by 9.5%, while the MSCI EM index slipped by 3.6%.

The financial sector outperformed the broader market mainly thanks to Safmar Financial Investment, Sberbank and Bank St Petersburg, whose shares outperformed the market despite the lack of fundamental news.

The power utilities sector was the worst performer overall, mostly due to RusHydro, FGC UES, and Inter Rao on the back of profit-taking after the companies achieved the best excess returns in the year to date.

Main Russian news

The Ministry of Finance claimed it will revise the budget for 2020 during the next three months, taking into account the consequences of the coronavirus epidemic. According to the Minister, Anton Siluanov, Russia will be able to finance all four years’ budget expenditure even with oil prices at around USD 30 per barrel. He also expressed confidence that such low prices would not persist for long as oil production costs, especially those of shale oil, are higher. In addition, the Deputy Minister of Finance, Alexey Moiseev, said that the Russian financial system is prepared for different shocks, including the spread of the new coronavirus. The Ministry claims that it is ready to take all necessary measures to maintain the stability of the financial system.

To watch…

Rosstat is due to publish inflation figures for February 2020.

OPEC and OPEC+ meetings are scheduled for this week.


Author: Marina Tsutskiridze, Junior Investment Specialist

Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); February 2020

Russian Equities Weekly 2 March 2020_STE
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