The Russian equity market surged to a historical high in rouble terms last week. In US dollar terms, the positive performance was even more pronounced. The central bank’s recent key rate hike and its abandonment of currency purchases for the Ministry of Finance are continuing to have a positive impact on the rouble. In addition, the market was likely supported by the change in investor sentiment as the turmoil in emerging markets has receded in recent weeks and the US adding 33 people and entities to the CAATSA section 31 sanctions List of Specified Persons had no impact on Russian equities (link).
The metals and mining sector outperformed the market, mainly driven by Rusal. The company’s shares jumped by 26.1% in RUB terms after the US Treasury’s Office of Foreign Assets Control (OFAC) announced that even if the sanctions against Rusal take full effect, it will be still possible for Rusal to sign new contracts with US residents who have existing business relationships with the company. The sector was also supported by Norilsk Nickel and NLMK’s stock prices rising by 4.8% and 4.5%, respectively.
The consumer goods sector lagged the market, mainly due to RusAgro., whose stock price fell by 4.5% despite the absence of major corporate news.
Russia’s main macroeconomic indicators remained generally positive in August. Industrial production was primarily driven by mineral resources extraction activity. Retail sales accelerated mainly due to higher non-food segment sales. The food retail segment slowed somewhat as the seasonal effect of lower prices on fruits and vegetables receded. Real wages continued to increase strongly.
The Ministry of Finance expects a significant increase in dividend payments by Russian state-owned companies for 2018, according to the federal budget draft. This would be achieved through higher payout ratios for major companies controlled by the state and higher profits, the ministry stated. As a result, dividend payments transferred to the federal budget may total some RUB 588 billion (about USD 9 billion), almost two times more than the corresponding payments for 2017, according to the ministry’s expectations.
In the US, OFAC delayed the deadline for sanctions against Rusal and En+ to come into effect, from 23 October to 12 November. According to a Treasury spokesperson, Rusal and En+ approached the US government about substantial corporate governance changes that could result in significant changes in control. As a result, OFAC decided to extend deadline to allow sufficient time for review (link).
OFAC also provided details of the specific restrictions against companies controlled by Oleg Deripaska. They would be able to sign new contracts with US residents once the latter are existing customers of the former (link).
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No major macroeconomic or corporate news expected in the coming week.
