Russian Equities Weekly 8-12 February, 2021: CBR signals end of rate-cut cycle

Russian equity market dynamics

Last week, the Russian equity market rose, but by less than the broader emerging market (EM) index.

The lag was mainly due to a Russia-specific factor, with media headlines speculating that the EU will impose new sanctions over Alexei Navalny’s detention.

  Week YTD
MSCI Russia 10/40 TR in USD 1.6% 2.5%
MSCI EM index TR in USD 2.4% 10.8%
Excess return -0.8% -8.3%
Due to Russia specific factors* -1.1% -3.4%
Due to difference in sector structure* 0.3% -5.0%
Key commodities**
Oil 5.9% 22.8%
Gold 0.7% -3.8%
RUB/USD 1.3% 0.5%
RUB/EUR 0.9% 0.9%
* See details of methodology in the end of the report

** Energy weight in the MSCI Russia 10/40 is 36%, Gold producers weight in the index is 9% (weights are as at the end of January 2021)

Data as of 12 February 2021

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 4%
Data as of 12 February 2021
TKB Investment Partners (JSC) calculations

Main Russian news

The Central Bank of Russia (CBR) left its key rate at 4.25%. This is the fourth time in a row the regulator has left the rate unchanged. The decision was made on the back of inflation accelerating above the CBR’s forecast due to the recovery in demand at a time of limited product supply. The weakening of the rouble also added 1% to annual inflation. The regulator signaled it is set to end the rate-cut cycle, but said that it was too early to discuss rate hikes. The bank also raised its annual inflation forecast for 2021 from 3.5%-4.0% to 3.7%-4.2%. It expects inflation to peak in February-March at 5.5% and decline thereafter. According to the CBR’s governor, Elvira Nabiullina, the Russian economy may return to its pre-pandemic level by the end of 2021. Previously, recovery to that level was expected only by mid-2022.

To watch…

Rosstat is due to publish macroeconomic figures for January 2021.


Author: Marina Tsutskiridze, Junior Investment Specialist

Sources: CBR, Vedomosti, Bloomberg, TKB Investment Partners (JSC); February 2021

Russian Equities Weekly_15 February_2021


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