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 |
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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