Russian Equities Weekly September 13–17, 2021: Following commodity price growth

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging markets by 2.9%.

The key Russia specific factor which helped Russian market performance vs EM on the back of oil price growth was larger exposure of Russian economy to commodities than other emerging markets on average. This means that even local demand oriented companies in Russia normally benefit from higher commodity prices (especially the oil price).

  Week YTD
MSCI Russia 10/40 TR in USD 0.7% 21.7%
MSCI EM index TR in USD -2.2% 0.7%
Excess return 2.9% 21.1%
Due to Russia specific factors* 2.1% 10.8%
Due to difference in sector structure* 0.8% 10.3%
MSCI EM HDY index TR in USD** -1.6% 7.8%
Key commodities***
Oil 2.8% 46.3%
Gold -2.2% -7.0%
FX    
RUB/USD 0.3% 1.4%
RUB/EUR 0.9% 5.4%
* 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 August 2021)

Data as of 17 September 2021

TKB Investment Partners (JSC) calculations; Bloomberg

  Current
Upside/downside to fair price 7%
Data as of 17 September 2021

TKB Investment Partners (JSC) calculations

Main Russian news

Russia held elections to the State Duma parliament. The preliminary results:

State Duma structure
Before elections According to preliminary results
United Russia 74.22% 49.79%
Communist Party 9.55% 19.04%
Liberal Democratic Party 8.88% 7.48%
A Just Russia-for the Truth 5.11% 7.41%
New People 5.36%

This would be the first time a fifth party passes the 5% barrier for entry into the State Duma since 1999. The final results will be released on 24 September. So far, there was no impact on the Russian market from the news.

Construction of Nord Stream 2 gas pipeline completed. This export pipeline from Russia to Europe across the Baltic Sea has a throughput capacity of 55 billion cubic meters per year. It will double the existing route’s annual volume of gas delivered to Europe. Russia plans to start supplying gas through the first string of Nord Stream 2 starting from early October 2021, and through both strings – in December. However, German regulators are yet to certify the pipeline. This could take up to four months.

To watch…

Rosstat is due to publish industrial production figures for August.

 

Author: Marina Tsutskiridze, Investment Specialist

Sources: The State Duma, Vedomosti, Bloomberg, TKB Investment Partners (JSC); September 2021

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