Russian Equities Weekly November 15–19, 2021: Pressured by geopolitical concerns and lower oil prices

Russian equity market dynamics

Last week, the Russian equity market underperformed the broader emerging markets (EM) index by 2.4%.

This was due to both a Russia-specific factor and the different sectoral structures of the two indices.

  • Russia-specific factor: Political tensions over military movements on the Russian-Ukrainian border continue to concern investors and put pressure on the Russian equity market
  • Sector-specific factor: An additional negative effect came from Russia’s overweight in the energy sector as oil prices declined.
  Week YTD
MSCI Russia 10/40 TR in USD -3.7% 22.4%
MSCI EM index TR in USD -1.3% 0.1%
Excess return -2.4% 22.2%
Due to Russia-specific factors* -1.2% 12.7%
Due to difference in sector structure* -1.2% 9.6%
MSCI EM HDY index TR in USD** -0.7% 6.7%
Key commodities***
Oil -4.0% 54.9%
Gold 0.0% -1.4%
FX
RUB/USD -0.9% 0.7%
RUB/EUR 0.8% 9.0%
* 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 38%; gold producers’ weight in the index is 9% (as at the end of October 2021)

Data as of 19 November 2021

TKB Investment Partners (JSC) calculations; Bloomberg

  Current
Upside/downside to fair price 12%
Data as of 19 November 2021

TKB Investment Partners (JSC) calculations

Main Russian news

According to a preliminary report from Rosstat, Russian GDP in the third quarter grew by 4.3% YoY. This is the highest figure for the period since 2011. Russia’s President Vladimir Putin said that the country’s GDP could grow by 4.7% by the end of 2021. Should that happen, the annual rate would be a record high since 2008. The Ministry of Economic Development expects the economy to grow by 4.2% in 2021, while the Central Bank of Russia estimates that growth will be 4%-4.5%.

 

To watch…

Rosstat is due to publish industrial production figures for October.

 

Author: Marina Tsutskiridze, Investment Specialist

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

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