Russian equity market dynamics

Last week, the Russian equity market underperformed the broader emerging markets (EM) index. The RTS index lost 1.7%, while the MSCI EM index rose by 1.8% (in USD terms). While expectations of new economic stimulus in the US supported EM, the Russian market came under pressure from the rouble weakening during the dividend season, which led to capital outflows. Moreover, the Central Bank of Russia halved the foreign currency sales within the framework of the budget rule – from RUB 10.4 billion (USD 140 million) a day to RUB 5.7 billion (USD 79 million) a day.

The metals and mining sector outperformed the broader Russian market, mainly thanks to Polyus and Polymetal, whose share prices rose by 11.0% and 10.1%, respectively, in rouble terms, on the back of higher gold prices.

The oil & gas sector was the worst performer, mostly due to Surgutneftegaz, whose share value fell by 2.5% despite the lack of fundamental news. With oil prices trading sideways and a lack of other catalysts, the sector had a lacklustre performance.

  Week YTD
RTS Total return (TR) in USD -1.7% -17.2%
MSCI EM index TR in USD 1.8% -1.5%
MOEX index TR in RUB
Composite 1.7% -0.7%
Blue chip 1.7% -4.2%
Small and mid-cap 2.5% 5.6%
MOEX sector indices TR in RUB
Metals & Mining 5.9% 28.7%
Financial Services 3.5% 9.0%
Consumer Goods 2.4% 25.1%
Power Utilities 0.2% 16.9%
Oil & Gas -0.5% -18.4%
FX
RUB/USD -3.3% -16.3%
RUB/EUR -4.2% -20.1%
Data as of 31 July 2020
TKB Investment Partners (JSC) calculations; Bloomberg

Main Russian news

The Russian government is spending RUB 10.9 billion (USD 150 million) in measures to support local airports affected by the coronavirus pandemicThe funds are earmarked to be distributed as supplements to employees’ salaries (excluding those of managers and board members) and the payment of insurance premiums, as well as towards the maintenance and repair of buildings and equipment. Rosaviatsia has currently issued 43% of the total amount of COVID subsidies allocated by the state to airports. Furthermore, RUB 23.4 billion (USD 315 million) will be allocated to support airlines. Rosaviatsia has already approved subsidies for Russian airlines totalling RUB 11.7 billion (USD 158 million).

To watch…

Rosstat is due to report the inflation figures for July.

Author: Marina Tsutskiridze, Junior Investment Specialist

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

Russian Equities Weekly 2 August 2020
Categories: Market Pulse