Russian equity market dynamics
Last week, the Russian equity market underperformed the broader emerging markets (EM) index by 4.0%. This was due to the Russia-specific factor of disturbing media headlines about developments in the Ukraine situation and speculation over a date of possible Russian invasion.
We continue to believe that the likelihood of material sanctions being imposed on Russia is low. The potential boomerang effect from material sanctions, such as restrictions on exports of raw materials, has in our view become even stronger due to the energy crisis in Europe and high oil prices.
|MSCI Russia 10/40 TR in USD||-4.7%||-11.0%|
|MSCI EM index TR in USD||-0.7%||0.1%|
|Due to Russia-specific factors*||-4.0%||-14.6%|
|Due to difference in sector structure*||0.0%||3.5%|
|MSCI EM HDY index TR in USD**||-1.2%||4.1%|
|* 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 18 February 2022
TKB Investment Partners (JSC) calculations; Bloomberg
|Upside/downside to fair price||41%|
|Data as of 18 February 2022
TKB Investment Partners (JSC) calculations
Main Russian news
According to preliminary data, Russia’s GDP grew by 4.7% in 2021, largely due to the recovery of economic activity after the pandemic. Production volumes increased in almost all sectors of the economy. Exports rose by 3.2% YoY and imports by 16.7% YoY after falling by 4.1% and 12.1%, respectively, a year earlier. According to a forecast by the Central Bank of Russia, the economy is set to grow by 2%-3% in 2022. The Ministry of Economic Development’s estimate is closer to 3%.
Diplomatic meetings regarding the situation in Ukraine are due to this week.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); February 2022