Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging markets (EM) index by 6.9%. This was mainly due to Russia-specific factors. The negotiations between Russia, the US and NATO reached no agreement on strategic stability and key geopolitical concerns.
The Russian authorities stated that Moscow sees no grounds for holding a new round of negotiations with the US on security guarantees in the near future. Additionally, on 12 January, the US Senate Democrats presented a bill covering a fresh package of sanctions targeting top Russian government and military officials, including President Vladimir Putin and key banking institutions.
We see the current drawdown as a good entry point for the Russian market now. For more information, please see our latest flash note January 2022 Sanction fears – good entry point for the Russian market.
|MSCI Russia 10/40 TR in USD||-4.3%||-6.3%|
|MSCI EM index TR in USD||2.6%||2.1%|
|Due to Russia-specific factors*||-7.0%||-9.7%|
|Due to difference in sector structure*||0.1%||1.4%|
|MSCI EM HDY index TR in USD**||1.2%||2.0%|
|* 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 36%; gold producers’ weight in the index is 9% (as at the end of December 2021)
Data as of 14 January 2022
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||28%|
|Data as of 14 January 2022
TKB Investment Partners (JSC) calculations
Main Russian news
Russian inflation in 2021 reached 8.4%. This was more than twice higher than the central bank’s target. December inflation moved sideways after hitting 8.4% YoY in November. Food segment inflation slowed to 10.6% YoY after 10.8% YoY in November. Services segment inflation also edged down from 5.2% YoY in November to 5.0% YoY in December. Non-food inflation accelerated to slightly 8.6% YoY after 8.3% YoY in November.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); January 2022