Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging markets (EM) index despite Biden’s apparent victory in the US presidential election being associated with possible additional sanctions on Russia.
Nassim Taleb, in his book “Antifragile: Things that Gain from Disorder”, presents an example of what happened to oil prices when the war against Iraq started in January 1991: They dropped instead of seeing the rise the consensus had predicted. “War could cause a rise in oil prices, but not scheduled war”. It looks like something similar has happened with the impact of the likely Biden’s victory on the Russian market. Read more in our recent flash note.
Main Russian news
Inflation in Russia hits the Central Bank of Russia’s (CBR) target of 4.0%, picking up from 3.7% in September. The consumer price index rose in both food and non-food segments. Food inflation rose to 4.8% YoY at the end of October from 4.4% YoY in the end of September, while non-food inflation rose to 4.2% YoY vs. 3.8% YoY the preceding month.
The CBR believes the rouble is likely to weaken somewhat in the coming months. In its report on monetary policy, the regulator noted that this weakening should be short term and should not pose any risks to medium-term inflation as weak consumer demand will constrain price increases. In its base scenario, the CBR forecasts inflation at 3.9%-4.2% in 2020, 3.5% -4.0% in 2021 and around 4% thereafter.
Author: Marina Tsutskiridze, Junior Investment Specialist
Sources: Rosstat, the CBR, Bloomberg, TKB Investment Partners (JSC); November 2020