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