Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging markets (EM) index. The EM were supported by US Federal Reserve approval of a new, softer inflation policy. The easing was taken by investors as a sign that the key rate will be kept at around 0% for the long term. At the same time Russian market relative performance was pressured by both country-specific and sector-specific factors:
- Concerns about the risk related to Russia potential interference in Belarus’ affairs continue to weigh on the Russian market. President Putin announced his readiness to support the Belarusian government with the help of a created law enforcement reserve in case of extremist actions such as arsons, looting or attempting to seize government buildings.
- The consumer discretionary sector is absent from the MSCI Russia 10/40 index. Thus, the EM consumer discretionary sector rising by 7% had the largest negative impact on the Russian market relative performance from the sector-specific perspective.
|MSCI Russia 10/40 TR in USD||-0.1%||-10.9%|
|MSCI EM index TR in USD||2.8%||2.3%|
|Due to Russia specific factors*||-1.6%||-2.0%|
|Due to difference in sector structure*||-1.3%||-11.1%|
|* See details of methodology in the report
** Energy weight in the MSCI Russia 10/40 is 32%, Gold producers weight in the index is 11% (weights are as at the end of July 2020)
Data as of 28 August 2020
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||12%|
|Data as of 28 August 2020
TKB Investment Partners (JSC) calculations
Rosstat is due to post inflation figures for August 2020 later this week.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Rosstat, Vedomosti, Bloomberg, TKB Investment Partners (JSC); August 2020Russian Equities Weekly_31 August 2020