Russian equity market dynamics
Last week, the Russian equity market performance was in line with that of the broader emerging market (EM) index. The negative impact of the difference in the two indices’ sector structures was offset by positive Russia-specific factors.
- Sector-specific factor: The negative effect came from Russia’s overweight in materials, as the sector rose by less than the broader market.
- Russia-specific factors: The positive effect came about due to investor optimism regarding the geopolitical situation after 16 June was confirmed as the date when President Putin and President Biden will meet in Geneva.
|MSCI Russia 10/40 TR in USD||2.4%||13.5%|
|MSCI EM index TR in USD||2.4%||6.0%|
|Due to Russia specific factors*||0.3%||2.0%|
|Due to difference in sector structure*||-0.3%||5.5%|
|MSCI EM HDY index TR in USD**||2.1%||11.2%|
|* See details of methodology at the end of the report
** MSCI Emerging Markets High Dividend Yield Index
*** We use Brent Oil and LBMA Gold price data, in USD terms. Energy weight in the MSCI Russia 10/40 is 33%; gold producers’ weight in the index is 9% (as at the end of April 2021)
Data as of 28 May 2021
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||5%|
|Data as of 28 May 2021
TKB Investment Partners (JSC) calculations
Main Russian news
In April, industrial production rose by 7.2% YoY, according to Rosstat. The growth was mainly due to an acceleration in the manufacturing segment, which increased by 14.2% YoY, and in industries related to water supply, waste disposal and pollution clean-up, which rose by 25.9% YoY. The energy production segment rose by 6.2% YoY. Rosstat said the increase was so large because of the low calculation base from April 2020 when activity levels plummeted due to the pandemic. Meanwhile in April, the extraction segment slowed by 1.8% YoY. According to Rosstat, the main reasons for this were the oil production cap agreed by OPEC+ and repair works at infrastructure facilities in the oil and gas sector.
The World Bank upgraded its forecast for Russia’s GDP growth. It now expects GDP growth of 3.2% in both 2021 and 2022. Previously, the Bank had forecast Russia’s economy to increase by 2.9% in 2021 and 3.2 % in 2022. The positive factors supporting growth were global economic recovery, rising oil prices and soft monetary policy on the internal market in 2021. The more optimistic scenario suggests economic growth of 3.8% in 2021 and 4.8% in 2022, according to the Bank.
There is no significant news to follow this week.
Author: Aleksandra Kuznetsova, Investment Specialist
Sources: Rosstat, Bloomberg, TKB Investment Partners (JSC); May 2021