Russian Equities Weekly August 23–27, 2021: Lagging EM with no news

Russian equity market dynamics

Last week, the Russian equity market rose by less than the broader emerging markets, underperforming the EM index by 1.9%.

This was mainly due to Russia-specific factors. Namely, Russian markets corrected after outperformance in the previous week. There were no significant Russian-specific factors behind that move.

  Week YTD
MSCI Russia 10/40 TR in USD 2.4% 17.4%
MSCI EM index TR in USD 4.3% 0.0%
Excess return -1.9% 17.4%
Due to Russia specific factors* -1.8% 8.0%
Due to difference in sector structure* -0.1% 9.4%
MSCI EM HDY index TR in USD** 2.7% 7.3%
Key commodities***
Oil 10.1% 39.3%
Gold 1.1% -4.7%
RUB/USD 0.6% 0.7%
RUB/EUR -0.9% 3.6%
* 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 27 August 2021

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 13%
Data as of 27 August 2021

TKB Investment Partners (JSC) calculations

Main Russian news

According to Rosstat, in July industrial production slowed to 6.8% YoY from 10.2% YoY in June. This was a result of a slowdown in both the extraction and manufacturing sectors. The extraction sector slowed to 11.6% YoY from 13.7% YoY a month earlier, while manufacturing segment slowed to 3.4% YoY from 7.6% YoY in June. The slowdown is likely explained by a low base in June 2021 due to Covid-19 restrictions.

Russian government debt rose to around USD 0.28 trillion (RUB 20.42 trillion) as at the end of the first half of 2021. That equates to a 7.8% increase since the beginning of the year. Currently, government debt amounts to approximately 17.7% of Russia’s GDP. Internal debt rose by 9.7% to USD 0.23 trillion (RUB 16.18 trillion). External debt rose by 3.2% to USD 58.54 billion. The Russian Chamber of Accounts explains the rise in debt by the low base effect.

To watch…

Rosstat is due to post some key macroeconomic figures for July 2021.


Author: Aleksandra Kuznetsova, Investment Specialist

Sources: Rosstat, Bloomberg, TKB Investment Partners (JSC); August 2021

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