The Russian equity market edged into the black last week, mainly thanks to oil prices rising and positive sentiment around the US-China trade talks. Oil prices continued to be supported by the OPEC+ supply cuts agreement and the US sanctions on Venezuelan exports. Expectations of positive results from the US-China talks supported global markets overall: the MSCI EM index gained 2.8% and the MSCI World rose by 1% in US dollar terms.

The oil and gas sector outperformed the wider market, supported by the performance of the oil price. Novatek, Lukoil and Tatneft were the top performers, rising by 3.8%, 1.9% and 1.2%, respectively, in rouble terms.

Companies in the financial sector lagged again. VTB Bank and Sberbank did the worst, with their shares falling by 1.4% and 1.3%, respectively, in rouble terms. Concerns over looming Western sanctions, in particular on Russian banks, continued to have a negative impact on this sector.

Week YTD
RTS Total Return (TR) in USD 1.8% 12.5%
MOEX index TR in RUB
Composite-0.1%5.3%
Blue Chip-0.1%6.2%
Small and mid-cap-0.4%5.5%
MOEX sector index TR in RUB
Oil & Gas
0.5%
2.7%
Metals & Mining
0.3%
3.5%
Power Utilities
-0.4%7.3%
Consumer Goods
-0.9%4.3%
Financial Services
-1.0%7.0%
FX
RUB/USD1.5%5.9%
RUB/EUR1.5%7.1%

Data as of February 22, 2019
Sources: TKB Investment Partners (JSC) calculations; Bloomberg

Main Russian news

Macroeconomic indicators deteriorated in January. Industrial production growth slowed, mainly due to slower growth in the two key segments: manufacturing and extraction. The OPEC+ agreement to cut oil production from this January held back extraction. Retail sales growth slowed to 1.6% YoY. However, this was above market expectations of 1%. The slowdown was mainly seen in the non-food segment; the food segment surprised with faster growth than in December. The dynamics of real disposable income deteriorated. In January, there was a decline in YoY terms. Real wage growth contracted as well. However, it managed to stay in positive territory. The worsening in the dynamics of disposable income and wages in real terms was partly due to inflation accelerating in January.

IndicatorGrowth YoY

 December 2018 January 2019
 Industrial production
 2.0% 1.1%
 Manufacturing  0% -1.0%
 Extraction 6.3% 4.8% 
 Retail sales 2.9% 1.6%
 Food 1.8% 2.1%
 Non-food 2.8% 1.2%
 Real disposable income 0.1% -1.3%
 Real wages 2.9% 0.2%

For the first time ever, the international reserves of the Central Bank of Russia fully cover all the country’s foreign debt, both at the state and private levels, the Russian president said in his address to the Federal Assembly. According to the central bank, the external debt, including debts of Russian government agencies, the CBR itself, commercial banks, companies and households to non-residents, fell by 12.4% YoY in January to USD 453.7 billion, reaching the lowest level since 1 April 2009. International reserves were USD 475.9 billion as at 31 January 2019.

To watch…

Gazprom Neft, Lenta, Norilsk Nickel, Bank VTB, Moscow Exchange are due to publish full-year 2018 IFRS results.


Author: Marina Tsutskiridze, junior investment specialist

Sources: Vedomosti, Rosstat, cbr.ru, Bloomberg, TKB Investment Partners (JSC); February 2019

Russian-Equities-Weekly_22-February_2019_

Categories: Market Pulse