Russian Equities Weekly 6–8 May, 2020: Inflation accelerates

  Week YTD
RTS Total return (TR) in USD 1.2% -26.6%
MOEX index TR in RUB    
Composite -0.3% -13.3%
Blue chip -0.2% -16.0%
Small and mid-cap -0.5% -10.3%
MOEX sector indices TR in RUB
Financial Services 2.1% -13.0%
Consumer Goods 0.5% -3.7%
Oil & Gas 0.0% -22.9%
Power Utilities -0.4% -3.1%
Metals & Mining -1.8% 9.3%
RUB/USD 1.3% -15.7%
RUB/EUR 2.4% -12.8%
Data as of May 8, 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 1.2%, while the MSCI EM index lost 0.5% (all figures in USD terms). The Russian market was supported by a 21% surge in oil prices on the back of a) the OPEC+ agreement entering into force on 1 May, and b) announcements of a gradual lifting of quarantine measures, which should lead to a recovery in oil demand.

The financial sector outperformed the broader market, mainly due to Safmar and MOEX, whose share prices rose by 9.2% and 5.7%, respectively, in rouble terms. Both companies outperformed the market despite the lack of fundamental news.

The metals & mining sector was the worst performer overall, mostly due to MMK and Novolipetsk Steel, whose shares declined by 5.4% and 2.6%, respectively, on the back of profit-taking.

Main Russian news

Inflation in Russia accelerated in April. The consumer price index (CPI) rose to 3.1% YoY at the end of April from 2.5% YoY at the end of March. Food inflation rose to 3.5% YoY from 2.2%, while non-food inflation rose to 2.8% YoY vs. 2.5%. Services inflation slowed to 2.9% YoY from 3.0% YoY in March. According to the Central Bank of Russia (CBR), the increase in inflation in April was driven by a temporary increase in demand for food and other essentials in response to the COVID-19 pandemic. According to the CBR, inflation acceleration is temporary and it can slow already in May. Based on this, the head of CBR E.Nabiullina hinted that there is a possibility of further key rate cut at the next meeting by up to 100bp.

The number of private investors on the Moscow Exchange has reached almost five million. During March-April, more than 630 000 private brokerage accounts were registered. The sharp increase can likely be explained by the desire of investors to take advantage of volatility to buy securities more cheaply. Moreover, deposit accounts in banks became less attractive due to the CBR’s key rate cuts. In April, the CBR lowered its key rate to 5.5% and held open the prospect of a further reduction at its next meeting. The rising number of private investors in the Russian equity market may become a new supporting force for stocks.

To watch…

There is no significant news due this week


Author: Marina Tsutskiridze, Junior Investment Specialist

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

Russian Equities Weekly 12 May 2020_STE
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