Russian Equities Weekly 1-5 March, 2021: Inflation continues to accelerate

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging market (EM) index by 2%.

The relative outperformance was mainly due to differences in the two indices’ sector structures.

  • Overweight in energy sector. The sector gained from oil prices rising by 8% in USD terms last week. Oil prices increased after OPEC+ decided not to increase production levels in April
  • Overweight in materials sector. The sector continues to make gains on the back of investor interest shifting from IT companies to cyclical stocks
  • Absence in consumer discretionary sector. The Russian market benefited in relative terms as the EM consumer discretionary sector declined by 2% in USD terms.
  Week YTD
MSCI Russia 10/40 TR in USD 2.1% 0.8%
MSCI EM index TR in USD 0.1% 3.9%
Excess return 2.0% -3.2%
Due to Russia specific factors* -0.2% -3.9%
Due to difference in sector structure* 2.2% 0.8%
Key commodities**
Oil 7.7% 35.6%
Gold -2.7% -10.1%
RUB/USD 0.3% -0.4%
RUB/EUR 1.8% 1.8%
* 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 February 2021)

Data as of 5 March 2021

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 7%
Data as of 5 March 2021
TKB Investment Partners (JSC) calculations

Main Russian news

Inflation accelerated in February to 5.7% YoY. The consumer price index (CPI) rose mainly due to increases in both the food and non-food segments. Food inflation accelerated to 7.7% YoY from 7.0% at the end of January, while non-food inflation rose to 5.7% YoY from 5.1%. Inflation in the services segment rose to 2.9% from 2.8% at the end of January. The Ministry of Economic Development said that government measures were helping to cap inflation growth. In December 2020, the Russian government announced its plans to tackle inflation in several goods categories. Among other measures, producers and retail chains agreed to stabilise sugar and sunflower oil prices. Additionally, Russia introduced quotas for wheat, rye, corn and barley exports. The Ministry expects inflation to peak in March and then gradually slow to around 4%.

OPEC+ decided not to increase oil production in April, with the exception of Russia and Kazakhstan. Analysts expect oil output to grow on average by 1.5 million b/d, thus the decision led to an oil price increase by 5% in USD terms on the day of the announcement. Russia was allowed to increase production by 130 000 b/d due to higher seasonal demand. This “exclusive right” to increase production will allow Russia to meet its own seasonal demand without hitting export volumes.


Author: Aleksandra Kuznetsova, Investment Specialist

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

Russian Equities Weekly_9 March_2021
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