Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging markets (EM) index, mainly due to the impact from Russia-specific factors: a strengthening of the rouble and growth of the Russian index heavyweight, Sber. The bank’s shares rose by 9% in USD terms. This was likely due to shareholders reinvesting dividends paid by the company earlier.
Main Russian news
Russia’s key macroeconomic indicators slowed in September. Industrial production worsened mainly due to a slowdown in manufacturing. The slight improvement in the extraction segment was not enough to compensate. Retail sales slowed in both the food and non-food segments. Rosstat published real wage growth data for August which showed an increase of 0.1% YoY.
The Central Bank of Russia (CBR) left the key rate unchanged at 4.25%. The bank expects volatility in the near term due to the worsening Covid-19 situation and geopolitical issues. The decision not to change the key rate was widely expected by the markets. The CBR expects inflation to be in the 3.9%-4.2% range at the end of 2020, then to range between 3.5% and 4.0% in 2021 and remain at around 4.0% in 2022. The bank also upgraded its GDP forecast for 2020. It now expects GDP to contract by 4.0%-5.0% in 2020, thus less severely than the 4.5%-5.5% it had forecast earlier. GDP is expected to start rising in 2021, by 3.0%-4.0%. The CBR hinted that there is a possibility of a rate cut at the next monetary policy meeting in December. The CBR governor, E. Nabiullina, said the bank is taking the worsening of the Covid-19 situation as its base case scenario and is considering a soft monetary policy for the next year.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Rosstat, Vedomosti, Bloomberg, TKB Investment Partners (JSC); October 2020