Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging markets (EM) index, mainly due to the impact from Russia-specific factors: a strengthening of the rouble and growth of the Russian index heavyweight, Sber. The bank’s shares rose by 9% in USD terms. This was likely due to shareholders reinvesting dividends paid by the company earlier.
|MSCI Russia 10/40 TR in USD||2.5%||-16.4%|
|MSCI EM index TR in USD||1.1%||3.9%|
|Due to Russia specific factors*||1.2%||-2.7%|
|Due to difference in sector structure*||0.2%||-17.6%|
|* See details of methodology in the report
** Energy weight in the MSCI Russia 10/40 is 33%, Gold producers weight in the index is 9% (weights are as at the end of September 2020)
Data as of 23 October 2020
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||13%|
|Data as of 23 October 2020
TKB Investment Partners (JSC) calculations
Main Russian news
Russia’s key macroeconomic indicators slowed in September. Industrial production worsened mainly due to a slowdown in manufacturing. The slight improvement in the extraction segment was not enough to compensate. Retail sales slowed in both the food and non-food segments. Rosstat published real wage growth data for August which showed an increase of 0.1% YoY.
|August 2020||September 2020|
|Real wages||0.1%*||Not available|
*Data revised by Rosstat
The Central Bank of Russia (CBR) left the key rate unchanged at 4.25%. The bank expects volatility in the near term due to the worsening Covid-19 situation and geopolitical issues. The decision not to change the key rate was widely expected by the markets. The CBR expects inflation to be in the 3.9%-4.2% range at the end of 2020, then to range between 3.5% and 4.0% in 2021 and remain at around 4.0% in 2022. The bank also upgraded its GDP forecast for 2020. It now expects GDP to contract by 4.0%-5.0% in 2020, thus less severely than the 4.5%-5.5% it had forecast earlier. GDP is expected to start rising in 2021, by 3.0%-4.0%. The CBR hinted that there is a possibility of a rate cut at the next monetary policy meeting in December. The CBR governor, E. Nabiullina, said the bank is taking the worsening of the Covid-19 situation as its base case scenario and is considering a soft monetary policy for the next year.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Rosstat, Vedomosti, Bloomberg, TKB Investment Partners (JSC); October 2020Russian Equities Weekly_26 October 2020