Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging market (EM) index by 5.9%.
The relative outperformance was due to both Russia-specific factors and the difference in the two indices’ sector structures.
- Russia-specific factors: New sanctions fears eased as investors saw no material effect from the latest resolution of the European Union parliament aiming to exclude Russia from the SWIFT international online payments system and pause the Nord Stream 2 gas pipeline project, among other measures
- Structure-specific factors: The Russian index’s overweight in the energy sector contributed to the relative performance amid an increase in oil prices. A further contributor was the overweight in the materials sector on the back of the 4% increase in gold prices. Additional support came from the underweight in the IT sector, which declined by 3%.
|MSCI Russia 10/40 TR in USD||6.0%||10.0%|
|MSCI EM index TR in USD||0.1%||4.9%|
|Due to Russia specific factors*||2.7%||-0.7%|
|Due to difference in sector structure*||1.6%||4.1%|
|* See details of methodology in the end of the report
** We use Brent Oil and LBMA Gold price data, in USD terms. Energy weight in the MSCI Russia 10/40 is 35%; gold producers’ weight in the index is 8% (as at the end of March 2021)
Data as of 7 May 2021
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||6%|
|Data as of 7 May 2021
TKB Investment Partners (JSC) calculations
Main Russian news
Russian inflation slowed in April. The consumer price index (CPI) declined to 5.5% YoY at the end of April from 5.8% YoY at the end of March. The decline was mainly due to food inflation slowing to 6.6% YoY from 7.6%YoY in April. Meanwhile, non-food inflation increased to 6.2% YoY from 5.9% YoY in March, and services inflation rose to 3.3 % YoY from 3.2% YoY. The Ministry of Finance explained that the rise in inflation was provoked by the government’s economic support programmes. The Ministry expects inflation to return to its target level of 4% or to slightly exceed it by the end of this year. The Central Bank of Russia expects 2021 inflation to be in the range of 4.7%-5.2%.
MSCI is due to publish the results of the May semiannual rebalancing.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Rosstat, Vedomosti, Bloomberg, TKB Investment Partners (JSC); May 2021