Russian Equities Weekly 13–17/4/2020: Russian external debt drops to an 11-year low

Week YTD
RTS Total return (TR) in USD -5.5% -30.1%
MOEX index TR in RUB
Composite -5.3% -16.5%
Blue chip -5.9% -19.7%
Small and mid-cap -3.8% -12.5%
MOEX sector indices TR in RUB
Financial Services -1.9% -18.5%
Metals & Mining -2.5% 7.6%
Power Utilities -3.4% -4.2%
Consumer Goods -3.6% -7.8%
Oil & Gas -8.1% -25.9%
RUB/USD -0.1% -16.1%
RUB/EUR 0.0% -13.9%
Data as of 17 April 2020
TKB Investment Partners (JSC) calculations; Bloomberg

Russian equity market dynamics

Last week, the Russian equity market underperformed the other emerging markets (EM). The RTS index lost 5.5%, while the MSCI EM index rose by 0.2% (all figures in USD terms). The 9% fall in the price of Brent crude put pressure on the Russian equity market. It appears some investors decided to take profit after the strong rebound of Russian equities related to expectations from the OPEC+ deal on production cuts to support oil prices.

The financial services sector outperformed the broader market. The main contributor was Moscow Exchange, whose share price rose by 7.6% in rouble terms. In the current period of market distress and volatility, trading volumes are increasing, which has had a positive impact on the company’s shares.

The oil & gas sector was the worst performer overall, mostly due to the fall in oil prices. The worst performers in the sector were Tatneft, Lukoil and Novatek, whose share prices contracted by 14.1%, 9.9% and 9.9%, respectively, in rouble terms.

Main Russian news

Russia’s external debt is at its lowest in 11 years. In Q1 2020, the country’s external debt contracted by 8% to USD 450 billion, according to the Central Bank of Russia (CBR). The main reason given was negative revaluation caused by the rouble weakening, which had a major effect on government debt securities and external liabilities in other sectors. The CBR’s debt fell by 20% to USD 11 billion, while state debt decreased by 15% to USD 60 billion. Bank sector debt contracted by 5% to USD 73 billion, its lowest since 2006.

President Putin announced new measures to support the economy. The government will provide small and medium-sized businesses (SMEs) in COVID-19 affected sectors with free financial assistance for essential purposes, e.g. the payment of salaries in April-May. Additionally, backbone enterprises will be provided with new loan products. The loans would be at the CBR’s key rate of 6%. Moreover, airline companies will receive USD 0.3 billion in financial support from the government. Regional public sector budgets will receive USD 2.7 billion in support. Along with the previous anti-COVID-19 measures announced by President Putin, the government is preparing a “second package” of state support for the economy.

The budgetary measures to fight the coronavirus and the consequences of quarantine measures will cost Russia about 2.8% of GDP, according to the Finance Minister, Anton Siluanov. Fiscal support for individuals, industries and economic areas is estimated to equate to more than 6.5% of GDP.

To watch…

Rosstat is due to publish a number of key macroeconomic figures for Q1 2020.

The Central Bank of Russia will hold a monetary policy meeting this week.


Author: Aleksandra Kuznetsova, Junior Investment Specialist

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

Russian Equities Weekly 20 April 2020_STE
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