Russian equity market dynamics
Last week, the Russian equity market moved in line with the broader emerging market (EM) index.
Positive macroeconomic statistics in China and the US drove investor appetite for risk, which supported emerging markets, including Russia. There was no major market-moving Russia-specific news.
|MSCI Russia 10/40 TR in USD||2.1%||32.3%|
|MSCI EM index TR in USD||2.1%||1.2%|
|Due to Russia specific factors*||-0.1%||15.8%|
|Due to difference in sector structure*||0.1%||15.3%|
|MSCI EM HDY index TR in USD**||1.2%||8.2%|
|* See details of methodology at the end of the report
**MSCI Emerging Markets High Dividend Yield Index
*** We use Brent Oil and LBMA Gold, in USD terms. Energy weight in the MSCI Russia 10/40 is 41%; gold producers’ weight in the index is 8% (as at the end of September 2021)
Data as of 15 October 2021
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||7%|
|Data as of 15 October 2021
TKB Investment Partners (JSC) calculations
Main Russian news
Russia’s external debt has risen by 4.7% since the start of the year. The increase amounted to USD 21.9 billion, lifting the total to USD 489.2 billion, or 31% of GDP. According to the Central Bank of Russia, the increase in the third quarter was mainly due to IMF reserve assistance of USD 17.5 billion. The IMF funds were to support the recovery from the pandemic and increase the liquidity of international reserves. Altogether, the IMF handed out USD 650 billion to 190 countries. Russia’s share was around 2.7%.
The IMF has upgraded its forecast for Russia’s economic growth in 2021 to 4.7%. In its July forecast, the organisation had expected 4.4% growth. At the same time, the IMF lowered its growth forecast for 2022 from 3.1% to 2.9%. Experts at the IMF explained that in 2021, Russia was recovering from the pandemic and that the budget deficit was likely to be returned to the fiscal rule’s limit in 2022. The Ministry of Economic Development earlier lifted its GDP growth forecast for 2021 from 3.8% to 4.2%. It cut its 2022 forecast from 3.2% to 3% to reflect monetary policy tightening as a result of accelerated inflation.
The Central Bank of Russia will hold a monetary policy meeting on 22 October 2021.
Author: Aleksandra Kuznetsova, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); October 2021