Russian Equities Weekly February 7–11, 2022: Another key rate hike by 100bp

Russian equity market dynamics

Last week, the Russian equity market outperformed the broader emerging markets (EM) index by 1.5%. This was due to both Russia-specific factors and the different sectoral make-up of the two indices.

  • Russia-specific factors: The Russian market did well during the week as concerns over sanctions eased. However, Friday’s US media reports on developments related to Ukraine limited the outperformance
  • Sector-specific factors: Support came from the Russian market’s overweight in the materials sector, which rose by 4% in the EM index.
  Week YTD
MSCI Russia 10/40 TR in USD 3.1% -6.7%
MSCI EM index TR in USD 1.6% 0.8%
Excess return 1.5% -7.4%
Due to Russia-specific factors* 0.6% -11.0%
Due to difference in sector structure* 0.9% 3.6%
MSCI EM HDY index TR in USD** 3.6% 5.4%
Key commodities***
Oil 2.3% 26.0%
Gold 1.5% 1.4%
RUB/USD -1.7% -2.7%
RUB/EUR -1.7% -2.6%
* 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 8% (as at the end of January 2022)

Data as of 11 February 2022

TKB Investment Partners (JSC) calculations; Bloomberg

Upside/downside to fair price 40%
Data as of 11 February 2022

TKB Investment Partners (JSC) calculations

Main Russian news

Inflation in Russia accelerated to 8.7% YoY in January from 8.4% in December. This is more than double the Central Bank of Russia’s target of 4%. Food inflation surged to 11.1% YoY from 10.6% a month earlier, while non-food inflation rose to 8.7% YoY from 8.6%. Services prices rose by 5.4% YoY from 5.0%. The CBR now expects inflation to be at 5.0%-6.0% in 2022 and to return to the target in the middle of 2023. 

The CBR increased its key rate by 100bp to 9.5%. This was in line with the market consensus. The main reason is the lack of improvement in taming inflation. The regulator also raised its assessment of the average level of the key rate in 2022 to 9-11% from 7.3-8.3%, indicating there was room for substantial further tightening.

Russia’s key macroeconomic indicators were stronger in December. Industrial production rose, mainly amid growth in the extraction segment, although growth was weaker than in November 2021. Retail sales strengthened mainly thanks to higher non-food purchases. Real wage growth data for November showed an increase of 3.4% YoY.

Key macroeconomic indicators, YoY dynamics

  November 2021 December 2021
Industrial production 7.6% 6.1%
Manufacturing 6.1% 4.3%
Extraction 10.7% 10.0%
Retail sales 3.1% 5.4%
Food 2.2% 2.7%
Non-food 3.9% 7.9%
Real wages 3.4% Not available


Author: Marina Tsutskiridze, Investment Specialist

Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); February 2022

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