Russian Equities Weekly 14-18 December, 2020: The Central Bank of Russia leaves the key rate at 4.25%

Russian equity market dynamics

Last week, the Russian equity market underperformed the broader emerging markets (EM) index. This was mainly due to the impact from Russia-specific factors. Sanction rhetoric regarding the Navalny case put pressure on the market. Last week Navalny pointed out several FSB officers who, in his opinion, poisoned him. The officers’ names also appeared in the investigation materials of CNN and German magazine Der Spiegel.

  Week YTD
MSCI Russia 10/40 TR in USD 0.2% -1.4%
MSCI EM index TR in USD 0.9% 16.1%
Excess return -0.7% -17.5%
Due to Russia specific factors* -1.1% -1.9%
Due to difference in sector structure* 0.5% -15.6%
Key commodities**
Oil 4.5% -21.7%
Gold 2.0% 24.1%
RUB/USD -0.5% -15.5%
RUB/EUR -1.8% -22.9%
* See details of methodology in the end of the report

** Energy weight in the MSCI Russia 10/40 is 34%, Gold producers weight in the index is 9% (weights are as at the end of November 2020)

Data as of 18 December 2020

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 1%
Data as of 18 December 2020
TKB Investment Partners (JSC) calculations

Main Russian news

Russia’s key macroeconomic indicators were mixed in November. Industrial production improved relative to October figures. This was mainly due to manufacturing segment which accelerated in YoY terms. Extraction slowed in YoY terms, however improved relative to October figures. Retail segment worsened because of slowdown in both food and non-food segments. Rosstat published real wage growth data for October which showed an increase of 0.5% YoY.

Indicator Growth YoY
October 2020 November 2020
Industrial production -5.5%* -2.6%
Manufacturing -3.7%* 1.1%
Extraction -9.0%* -7.6%
Retail sales -1.4%* -3.1%
Food -2.6%* -4.3%
Non-food 0.0%* -1.7%
Real wages 0.5%* Not available

*Data revised by Rosstat

The Central Bank of Russia (CBR) left the key rate unchanged at 4.25%. The decision was widely expected by the market due to inflation acceleration in food and non-food segments. This is the third CBR’s decision in a row to leave the rate at this level. The regulator stated that the inflation at the end of the year will be higher than expected, in range 4.6-4.9%. Earlier CBR forecasted the range of 3.9-4.2%. The Bank expects inflation to be in 3.5–4.0% range in 2021 and continue to stay around 4% afterwards.

Bloomberg named Russia as the second most economically perspective country in 2021 among the emerging markets. The rating was based on the 11 parameters of economic and financial stability. Agency stated strong external accounts and fiscal balance on the back of undervalued rouble as the reasons for Russia’s high score.


Author: Aleksandra Kuznetsova, Junior Investment Specialist

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

Russian Equities Weekly_21 December 2020
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