Russian Equities Weekly September 20–24, 2021: Raising 2021 GDP growth estimate

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging markets by 1.2%.

This was mainly due to the difference in the two indices’ sector structures. The Russian market was supported by its overweight in the energy sector, which rose by 2.2% in the EM index.

	Week	YTD
MSCI Russia 10/40 TR in USD	0.2%	22.0%
MSCI EM index TR in USD	-1.0%	-0.3%
Excess return	1.2%	22.3%
Due to Russia specific factors*	-0.1%	10.8%
Due to difference in sector structure*	1.3%	11.5%
MSCI EM HDY index TR in USD**	-1.0%	6.7%
Key commodities***
Oil	3.8%	51.8%
Gold	-0.5%	-7.5%
FX
RUB/USD	0.1%	1.6%
RUB/EUR	0.0%	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 24 September 2021 TKB Investment Partners (JSC) calculations; Bloomberg
	Current
Upside/downside to fair price	10%
Data as of 24 September 2021 TKB Investment Partners (JSC) calculations

Main Russian news

The Fitch ratings agency raised its GDP forecast for Russia for 2021 to 4.3% compared to 3.7% in its June assessment. The agency’s forecast for 2022 remains at 2.7%, and for 2023 at 2%. Fitch expects inflation to stand at around 6% by the end of 2021, at 4.2% in 2022, and at 4% in 2023. The agency’s view is that Russia’s investment grade BBB sovereign rating is supported by a strong external balance of payments, low government debt and robust macroeconomic policies that have helped maintain stability amid the Covid-19 shock and high oil price volatility.

Russia’s Ministry of Economic Development also raised its estimate of economic growth in 2021. It now expects GDP growth of 4.2% in 2021, compared to its previous forecast of 3.8%. Moreover, it raised its inflation forecast for 2021 to 5.8% from the 5% it forecast in its July report. At the same time, the Ministry lowered its forecast for GDP growth in 2022 3.2% to 3%.