Russian Equities Weekly 9-13 November, 2020: Leading the broader emerging markets

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging markets (EM) index mostly thanks to the difference in the sector structure. The Russian index’s overweight in the energy sector supported the market as oil prices rose by 8% on news of the high efficacy rate revealed in late-stage trials of the Pfizer COVID vaccine. The EM consumer discretionary sector declining by 5% also contributed to the Russian market’s relative performance.

  Week YTD
MSCI Russia 10/40 TR in USD 2.7% -13.3%
MSCI EM index TR in USD 1.0% 8.7%
Excess return 1.6% -21.9%
Due to Russia specific factors* -0.6% -4.0%
Due to difference in sector structure* 2.2% -17.9%
Key commodities**
Oil 8.1% -36.8%
Gold -2.6% 24.8%
RUB/USD 0.3% -19.7%
RUB/EUR 0.0% -24.3%
* See details of methodology in the end of the report

** Energy weight in the MSCI Russia 10/40 is 32%, Gold producers weight in the index is 9% (weights are as at the end of October 2020)

Data as of 13 November 2020

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 13%***
*** We have updated upside calculation – now it does not include forecast for 2020

Data as of 13 November 2020
TKB Investment Partners (JSC) calculations

Main Russian news

According to preliminary results from Rosstat, Russian GDP fell by 3.6% YoY in the third quarter of 2020. In the previous quarter, GDP had dropped by 8% YoY. Rosstat noted the improvement in the agricultural sector, which rose by 2.7%. The biggest decline occurred in the passenger turnover (-44.7%) and public catering (-20.1%) segments.

The Russian Duma approved an increase in the personal income tax rate to 15% from the current 13%. This will affect people on incomes above RUB 5 million a year (~USD 65 000) including income from dividends, securities operations and wages. According to the government, the move could boost the budget by about RUB 60 billion (USD 0.8 billion) in 2021, RUB 64 billion (USD 0.8 billion) in 2022 and approximately RUB 69 billion (USD 0.9 billion) in 2023. The funds from the tax increase will be used for the treatment of children with rare diseases.

To watch…

Rosstat is due to publish some key macroeconomic figures, including industrial production for October.


Author: Aleksandra Kuznetsova, Junior Investment Specialist

Sources: Rosstat, the CBR, Bloomberg, TKB Investment Partners (JSC); November 2020

Russian Equities Weekly_16 November 2020
Previous Story

“Russian Tencent” and the ongoing transformation of MSCI Russia 10/40 index

Next Story

Russian Equities Weekly 16-20 November, 2020: Russia outperforms EMs for the third week running