Russian Equities Weekly 30/03–03/04/2020: Riding the oil wave

Week YTD
RTS Total return (TR) in USD 9.9% -32.2%
MOEX index TR in RUB
Composite 7.1% -15.3%
Blue chip 7.5% -17.8%
Small and mid-cap 4.8% -14.2%
MOEX sector indices TR in RUB
Oil & Gas 12.9% -20.7%
Power Utilities 6.5% -6.0%
Consumer Goods 3.6% -7.6%
Financial Services 3.1% -23.5%
Metals & Mining 2.6% 3.2%
RUB/USD 3.1% -19.0%
RUB/EUR 6.1% -16.0%
Data as of 3 April 2020
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

Last week, the Russian equity market outperformed the other emerging markets (EM). The RTS index gained 9.9%, while the MSCI EM index contracted by 1.2% (all figures in USD terms). The strong outperformance was due to oil price surge of 22% for Brent during the week. Donald Trump’s announcement about ongoing talks with Saudi Arabia and Russia and his expectations about a potential 10-15 million barrels per day in production cuts was welcomed by financial markets.

The oil & gas sector benefited the most from the rise in oil prices, leading it to outperform the broader market. The main contributors were Lukoil, Novatek and Rosneft, whose shares rose by 17.3%, 13.5% and 13.9%, respectively, in rouble terms. Rosneft stocks were additionally supported by the news that the company has sold its assets in Venezuela to the Russian government in an attempt to avoid potential further sanctions from the US.

The metals & mining sector was the worst performer overall, mostly due to Polyus and Norilsk Nickel. Both companies’ share prices fell on the back of profit-taking activities.

Main Russian news

The governor of the Central Bank of Russia (CBR), Elvira Nabiullina, sees the potential for a further key rate cut in 2020. She said rising inflation will be a short-term factor to consider. However, the demand and supply shocks caused by the COVID-19 spread and the resulting prolonged lockdown will be the long-term factors that may lead to the need for a rate cut. Nabiullina said the CBR will be ready to use this move later this year as she considers the consensus 6% key rate by the end of 2020 to be appropriate.

In Nabiullina’s assessment, a month of non-working days, as announced by President Putin, will cost the economy 1.5%-2% of GDP. The CBR governor added that the negative impact of coronavirus on the economy will peak in Q2 2020, after which Russia should be moving towards economic recovery in the second half of the year.

To watch…

Rosstat is due to publish inflation figures for March 2020.

OPEC+ is to hold a teleconference on 9 April.


Author: Aleksandra Kuznetsova, Junior Investment Specialist

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

Russian Equities Weekly 6 April 2020
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