Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging markets (EM) index by 3.7%.
This was due to both Russia-specific factors and the different sectoral structures of the two indices.
- Russia-specific factors: Positive investor sentiment increased on talks that a second Putin-Biden summit may be held before year-end. It is expected that the meeting could reduce the current geopolitical tensions
- Sector-specific factor: An additional positive effect came from Russia’s overweight in the energy sector, which rose by 4% in the EM index, and underweight in the consumer discretionary sector, which dropped by almost 6%.
|MSCI Russia 10/40 TR in USD||3.9%||17.4%|
|MSCI EM index TR in USD||0.2%||-3.3%|
|Due to Russia-specific factors*||2.2%||9.4%|
|Due to difference in sector structure*||1.6%||11.3%|
|MSCI EM HDY index TR in USD**||1.6%||5.7%|
|* 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 November 2021)
Data as of 3 December 2021
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||17%|
|Data as of 3 December 2021
TKB Investment Partners (JSC) calculations
Main Russian news
Russia’s key macroeconomic indicators were stronger in October on an annualised basis. Industrial production rose, mainly amid growth in the extraction segment, which was supported by the growth of oil and gas (8.9% YoY), and coal (9.1% YoY) production. Retail sales strengthened thanks to higher food and non-food purchases, although the growth was weaker than in September 2021. Real wage growth data for September showed an increase of 2.0% YoY.
Key macroeconomic indicators, YoY dynamics
|September 2021||October 2021|
|Real wages||2.0%||Not available|
* Data updated by Rosstat
The World Bank (WB) lowered its forecast for Russian economic growth. The bank expects Russian GDP to grow by 2.4% in 2022, which is slightly down on its October forecast of 2.8%. The weaker outlook was mainly due to the production gap being closed earlier than expected amid the rapid recovery this year. Another reason was Russia’s low COVID-19 vaccination rates and high number of cases. The WB noted that the vaccination rate will likely be one of the main factors determining the outlook for numerous countries in the coming year.
Rosstat is due to publish inflation figures for November later this week.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); December 2021