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.
|MSCI Russia 10/40 TR in USD||0.2%||22.0%|
|MSCI EM index TR in USD||-1.0%||-0.3%|
|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%|
|* 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
|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%.
Rosstat is due to publish macroeconomic figures for August.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); September 2021