Russian equity market dynamics

Last week, Russian equities moved in line with the broader emerging markets (EM) index. The Russia-specific factor contributed to the market’s relative performance mainly due to the advance in index heavy-weight Yandex (‘Russian Google’). The company announced it planned to buy Tinkoff bank for USD 5.5 billion. The market welcomed the news. The deal is likely to allow Yandex to significantly improve the financial services part of its ecosystem. However, the sector factor outweighed the positive impact of the Russia-specific one.

  Week YTD
MSCI Russia 10/40 TR in USD -4.9% -17.8%
MSCI EM index TR in USD -4.4% -3.3%
Excess return -0.5% -14.5%
Due to Russia specific factors* 0.8% -0.4%
Due to difference in sector structure* -1.3% -14.1%
Key commodities**
Oil -2.9% -38.1%
Gold -4.7% 22.8%
FX
RUB/USD -3.2% -20.6%
RUB/EUR -1.8% -23.6%
* 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 August 2020)
Data as of 28 September 2020
TKB Investment Partners (JSC) calculations; Bloomberg

 

  Current
Upside/downside to fair price 16%
Data as of 28 September 2020
TKB Investment Partners (JSC) calculations

Main Russian news

The Ministry of Economic Development expects GDP to start rising already in 2021. In its base case scenario, it forecast a 3.9% contraction in 2020, 3.3% growth in 2021 and a 3.4% increase in 2022. In a more conservative scenario, the ministry expected growth of 2.7% in 2021 and 2.9% growth the following year. This scenario would reflect the prolonged slowdown in economic activity in the sectors affected most by the pandemic, according to the report. The conservative outlook assumed a USD 43-45/bbl price of crude oil in the medium term due to weak oil demand. In the base case scenario, this figure was higher – USD 46-48/bbl.

Author: Aleksandra Kuznetsova, Junior Investment Specialist

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

Russian Equities Weekly_28 September 2020
Categories: Market Pulse