Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging market (EM) index by 0.9%. This was mainly due to the difference in the two indices’ sector structures. An absence of IT companies pressured the Russian index’s relative performance, as the EM IT sector rose by 3.3%. Additionally, the overweight in the materials sector impacted the Russian market, as the sector underperformed the broader EM.
|MSCI Russia 10/40 TR in USD||0.3%||16.6%|
|MSCI EM index TR in USD||1.2%||1.4%|
|Due to Russia specific factors*||0.0%||8.4%|
|Due to difference in sector structure*||-0.9%||6.8%|
|MSCI EM HDY index TR in USD**||1.4%||7.8%|
|* 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 35%; gold producers’ weight in the index is 8% (as at the end of July 2021)
Data as of 6 August 2021
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||11%|
|Data as of 6 August 2021
TKB Investment Partners (JSC) calculations
Main Russian news
Russian inflation was almost flat in July. The consumer price index (CPI) rose to 6.46% YoY at the end of July after 6.5% YoY at the end of June. Food inflation rose to 7.4% YoY from 7.9% YoY in June but non-food inflation increased to 7.6% YoY from 7.0% YoY the preceding month. Services inflation slowed from 4.0% YoY last month to 3.8% YoY in July. The Central Bank of Russia forecasts inflation for 2021 to be between 5.7% and 6.2%. The Ministry of Economic Development expects inflation to be around 5% YoY at the end of the year.
The number of individual brokerage accounts on the Moscow Exchange has exceeded 13.2 million. In July, about 446 000 people joined the Russian market. According to data from Moscow Exchange, individuals invested USD 0.5 billion (RUB 34 billion) in Russian equities during July. From the beginning of the year, retail investors have bought a total of some USD 3.3 billion (RUB 243 billion) of Russian stocks.
The Ministry of Finance announced the reduction of the state borrowing programme by USD 12 billion (RUB 875 billion). According to the Ministry, the move will allow Russia’s debt policy to normalise by the end of this year, which in turn will likely have a positive effect on interest rates and ensure the maintenance of a safe level of state debt for the next three years.
There is no significant news to follow this week.
Author: Aleksandra Kuznetsova, Investment Specialist
Sources: Rosstat, Bloomberg, TKB Investment Partners (JSC); August 2021