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