Russian Equities Weekly October 25–29, 2021: Key macroeconomic indicators show strength

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging market (EM) index by 0.2% despite news reports of Microsoft alleging that Russian state-sponsored hackers were increasingly attacking cloud services companies. It is hard to identify the specific factors that helped the market performance.

  Week YTD
MSCI Russia 10/40 TR in USD -2.0% 29.7%
MSCI EM index TR in USD -2.2% -0.3%
Excess return 0.2% 29.9%
Due to Russia specific factors* 0.4% 17.5%
Due to difference in sector structure* -0.2% 12.4%
MSCI EM HDY index TR in USD** -2.3% 5.8%
Key commodities***
Oil -1.3% 64.0%
Gold -2.2% -6.3%
FX    
RUB/USD -0.4% 4.5%
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 29 October 2021

TKB Investment Partners (JSC) calculations; Bloomberg

  Current
Upside/downside to fair price 7%
Data as of 29 October 2021

TKB Investment Partners (JSC) calculations

Main Russian news

Russia’s key macroeconomic indicators strengthened in September. Industrial production rose amid growth in both the manufacturing and extraction segments. Industrial production growth exceeded pre-pandemic levels. In the extraction segment, growth returned to the pre-pandemic level of February 2020. Retail sales strengthened thanks to higher food and non-food purchases. Real wage growth data for August showed an increase of 1.5% YoY.

Key macroeconomic indicators, YoY dynamics

August 2021 September 2021
Industrial production 4.6%* 6.8%
Manufacturing 2.9%* 4.6%
Extraction 6.6%* 9.5%
Retail sales 5.3% 5.6%
Food 2.8% 3.0%
Non-food 7.5% 8.0%
Real wages 1.5%* Not available

*Data updated by Rosstat

Russian citizens’ inflation expectations for the next 12 months reached a five-year high. According to the Central Bank of Russia, October’s level rose by 1.3 percentage points from September to 13.6%. The CBR has forecast annual inflation by the end of 2021 of 7.4-7.9%. It expects annual inflation to ease to 4.0-4.5% in 2022 and be close to 4% after that.

After an investigation, the US Department of Commerce said Russia remains a country with a market economy. The absence of such a status allows anti-dumping duties to be applied to Russia. The Russian Ministry of Economic Development said the decision was a positive signal as Russian exporters retained opportunities to protect their interests in US anti-dumping procedures. The last time the US conducted the similar investigation was in 2002 when Russia was assigned the status of a market economy country.

To watch…

Rosstat is due to publish inflation figures for October 2021.

 

Author: Aleksandra Kuznetsova, Investment Specialist

Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); November 2021

Download a full version of the article in PDF format

Previous Story

Russian Equities Weekly October 18–22, 2021: Key rate rises by 75bp to 7.5%

Next Story

Reasons to have an overweight in Russia in an EM equity portfolio