Last week, the Russian equity market outperformed its peers mainly thanks to expectations of a higher dividend pay-out by Gazprom. The RTS index gained 3.5%, while the MSCI EM index retreated by 3.6%, and the MSCI World index fell by 0.3% due to US-China trade war risks.

  • Gazprom shares rose by 21.6% in rouble terms after it announced a sharp rise in its 2018 dividend payment. In April, the company management had proposed a record dividend for 2018 of RUB 10.43 per share, but last week it endorsed the new proposal of RUB 16.61 per share
  • Higher oil prices also helped Russian equities. Brent crude rose by 2.3% on concerns over supply disruptions caused by Saudi Arabia’s report of a drone attack on two pumping stations.
  Week YTD
RTS Total return (TR) in USD 3.5% 18.2%
MOEX index TR in RUB
Composite 2.6% 9.5%
Blue chip 3.1% 11.6%
Small and mid-cap 1.9% 7.1%
MOEX sector indices TR in RUB
Oil & Gas 2.6% 4.6%
Power Utilities 2.0% 11.3%
Consumer Goods 1.2% 8.0%
Financial Services 0.9% 10.8%
Metals & Mining -2.0% -1.1%
FX
RUB/USD 0.7% 6.9%
RUB/EUR 2.2% 10.3%

Data as of May 17, 2019
TKB Investment Partners (JSC) calculations; Bloomberg

The oil and gas sector outperformed the market following strong performance of Gazprom stocks.

Metals and mining lagged the market due to weak dymanic in polish dimond prices over last months and concerns over basic metals prices caused by uncertainty on the US-Chinese trade war.

Main Russian news

Rosstat reported a sharp slowdown in Russian economy in Q1 of 2019. According to preliminary estimate, the GDP growth slowed to 0.5% YoY over last three months vs. 2.7% growth YoY in 4Q18. This was below the expectations of the Ministry of Economic Development, which predicted an increase of 0.8%. The main reason of the slowdown was a reduction in domestic demand amid VAT increase, according to the Ministry. The Ministry expects the economy growth in 2019 to accelerate by 1.3% thanks to higher government spending on infrastructure projects and lower inflation.

The Ministry expects the economy growth in 2019 to accelerate by 1.3%

The Ministry of Finance (MoF) has fulfilled the plan for Q2 of 2019 for placing OFZ. Investors are chasing high returns and actively buy treasury bonds, waiting that the Central Bank will cut in the key rate. MoF managed to sell 638 billion roubles in Q2 (around 9.9 billion US Dollars) worth of OFZ bonds, while the plan was 600 billion roubles. In April, non-resident share in Russian OFZ purchases exceeded 41.6% vs 31% in February and 40.7% in March.

To watch…

Rosstat is going to publish key macro figures for April.


Author: Marina Tsutskiridze, Junior Investment Specialist

Sources: Vedomosti, Rosstat, Bloomberg, TKB Investment Partners (JSC); May 2019

Russian-Equities-Weekly-20-May-2019

Categories: Market Pulse