Russian Equities Weekly 30 November - 4 December, 2020: Russian equities maintain their lead

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging markets (EM) index for the fifth week running.

This was due to the impact from both Russia-specific factors and a difference in sector structures:

  • Russia-specific factors: The rouble strengthened by 2.5%, which likely happened on the back of foreign investors’ increased interest in local bonds
  • Difference in sector structures: The EM consumer discretionary sector declining by 3% contributed to the Russian market’s relative performance. The overweight in the materials sector supported the Russian equity market amid the increase in gold prices.
  Week YTD
MSCI Russia 10/40 TR in USD 3.1% -5.6%
MSCI EM index TR in USD 1.7% 14.4%
Excess return 1.5% -20.0%
Due to Russia specific factors* 0.8% -3.3%
Due to difference in sector structure* 0.7% -16.7%
Key commodities**
Oil 2.2% -26.7%
Gold 3.6% 21.7%
RUB/USD 2.5% -16.3%
RUB/EUR 0.9% -22.9%
* See details of methodology in the end of the report

** Energy weight in the MSCI Russia 10/40 is 35%, Gold producers weight in the index is 9% (weights are as at the end of November 2020)

Data as of 4 December 2020

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 5%
Data as of 4 December 2020
TKB Investment Partners (JSC) calculations

Main Russian news

Inflation in Russia accelerated in November to 4.4% YoY. The consumer price index (CPI) rose in both the food and non-food segments. Food inflation rose to 5.8% YoY at the end of November from 4.8% YoY at the end of October, while non-food inflation rose to 4.5% YoY vs. 4.2% YoY. One of the main reasons for the CPI rising was the rouble weakening by 4% during the month.

Starting from 2021, the Russian statistics service, Rosstat, plans to use a new method for calculating inflation, which will combine big data from cash registers and artificial intelligence technology. Currently Rosstat manually collects price data for about 400 goods and 120 services to calculate inflation, collecting around 700 000 price quotations. With the new method, the number of price quotes will increase to several million.

OPEC + agreed to increase oil production by 500 000 barrels per day (bpd) from January 2021. This is significantly lower than the previously expected increase of two million bpd. Thus, from the start of 2021, production cuts will be reduced to 7.2 million bpd from the current levels of 7.7 million bpd. The issue over whether to adjust the volume of production will in future be discussed by the OPEC+ members on a monthly basis.

The number of retail investors on the Moscow Exchange has reached eight million. In November, more than 560 000 people joined the Moscow Exchange. Net inflows from individual Russian investors into the Russian equity market since the beginning of year total more than USD 4 billion. However, November saw record monthly outflows from retail brokerage accounts, totalling RUB 116 billion (~USD 1.5 billion). This was likely to have been due to profit taking as many Russia investors bought Russian stocks during the initial COVID turmoil in March-April. Foreign investors appear to have somewhat compensated for these outflows with their net purchases of Russian stocks.


Author: Marina Tsutskiridze, Junior Investment Specialist

Sources: Rosstat, Moscow Exchange, Vedomosti, Bloomberg, TKB Investment Partners (JSC); December 2020

Russian Equities Weekly_7 December 2020
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