Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging market (EM) index by 0.8%.
This was due to the difference in sector structures of the two indices, mainly the overweight in energy and materials. These sectors fell by 2.8% and 2.2% in the EM index, respectively. Russia-specific factors partially offset the impact from the sector-specific factors. These mainly concerned greater investor optimism over stronger Russia-EU energy cooperation in the face of the energy crisis in Europe.
| Week | YTD | |
| MSCI Russia 10/40 TR in USD | 0.0% | 32.2% |
| MSCI EM index TR in USD | 0.7% | 2.0% |
| Excess return | -0.8% | 30.3% |
| Due to Russia specific factors* | 1.3% | 17.4% |
| Due to difference in sector structure* | -2.1% | 12.9% |
| MSCI EM HDY index TR in USD** | 0.0% | 8.2% |
| Key commodities*** | ||
| Oil | 0.1% | 66.1% |
| Gold | 2.0% | -4.2% |
| FX | ||
| RUB/USD | 0.6% | 5.0% |
| RUB/EUR | 0.0% | 9.9% |
| * 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 22 October 2021 TKB Investment Partners (JSC) calculations; Bloomberg |
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| Current | ||
| Upside/downside to fair price | 7% | |
| Data as of 22 October 2021
TKB Investment Partners (JSC) calculations |
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Main Russian news
The Central Bank of Russia unexpectedly raised its key rate by 75bp to 7.50%. The market had expected a 25-50bp increase. The bank noted that inflation continued to exceed its forecast substantially and now it is expected to be at 7.4-7.9% at the end of 2021. Based on the CBR’s latest forecast, inflation will edge down to 4.0-4.5% in 2022 and remain at close to 4% later. CBR Governor E. Nabiullina said that the new forecast suggested the average key rate would be at 7.3-8.3% in 2022, and at 5.5-6.5% in 2023.
To watch…
Rosstat is due to publish industrial production figures.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); October 2021
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