Russian Equities Weekly 15-19 February, 2021: Russian non-resource non-energy export reaches new record

Russian equity market dynamics

Last week, the Russian equity market contracted, underperforming the broader emerging market (EM) index.

The lag was mainly due to Russia-specific factors. Global media reports continue to speculate on whether the EU will impose new sanctions targeted at Russian individuals allegedly connected with the Navalny poisoning case.

  Week YTD
MSCI Russia 10/40 TR in USD -0.6% 1.8%
MSCI EM index TR in USD 0.1% 10.9%
Excess return -0.7% -9.1%
Due to Russia specific factors* -1.3% -4.8%
Due to difference in sector structure* 0.6% -4.2%
Key commodities**
Oil -1.2% 21.4%
Gold -1.7% -5.4%
RUB/USD -0.6% -0.1%
RUB/EUR -0.9% 0.0%
* 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 19 February 2021

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 6%
Data as of 19 February 2021
TKB Investment Partners (JSC) calculations

Main Russian news

Russia’s key macroeconomic indicators were mixed in January. Industrial production slowed in YoY terms, mainly due to a slowdown in the manufacturing segment. The extraction sector also slowed in YoY terms, but showed a slight improvement relative to its December performance. Retail sales improved relative to the previous month in both the food and non-food segments. Rosstat published real wage growth data for December, which showed an increase of 4.6% YoY.

Key macroeconomic indicators, YoY dynamics

Indicator Growth YoY
December 2020 January 2021
Industrial production 2.1%* -2.5%
Manufacturing 7.9%* -1.0%
Extraction -7.5%* -7.1%
Retail sales -3.6% -0.1%
Food -4.5% -1.0%
Non-food -2.6% 0.9%
Real wages 4.6%* Not available

*Data revised by Rosstat

Russian non-resource non-energy exports (NRE) reached a new record level in 2020. Last year, Russia exported USD 161 billion of NRE goods, which was 4% more than in 2019. The sector grew despite the decline in overall exports by 20% in 2020 relative to 2019. Last year was the third in a row to see the record for NRE goods exports broken. The largest shares of this sector were metal production (21%), automobile production (18%), food (17%) and chemicals (16%). The major counterparts for Russian NRE exports were China (USD 16 billion), Kazakhstan (USD 12 billion), Belarus (USD 9 billion), Turkey (USD 8 billion) and the Netherlands (USD 6 billion).

Germany hopes to persuade the US to lift its sanctions relating to the Nord Stream 2 pipeline project. Berlin experts believe that the appointment of the new US secretary of state, Anthony Blinken, could result in a fresh approach to the dispute. Blinken has published a book in which he argued that supporting allies is more important to the US than controlling their economic affairs with Russia. At the moment, Germany is working on a new deal to present to the US which could allow for the sanctions to be lifted. One of the proposed solutions is to create a mechanism that allows Germany to shut off Nord Stream 2 in conflict situations, such as Russia pressuring Ukraine.

Author: Aleksandra Kuznetsova, Junior Investment Specialist

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

Russian Equities Weekly_24 February_2021
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