Russian equity market dynamics
Last week, the Russian equity market rose by less than the other emerging markets (EM). The RTS index gained 4.0%, while the MSCI EM index increased by 5.2% (all figures in USD terms). The US government’s announcement of new measures to support the country’s economy had a positive knock-on effect for EMs, including Russia. Further support came from rising Brent crude oil prices. The outperformance of Russian equities the preceding week mitigated the gains last week.
The consumer goods sector outperformed the broader market, mainly due to Magnit, Yandex and Ros Agro, whose share prices rose by 14.8%, 8.8% and 4.1%, respectively, in rouble terms. All three companies reported strong results for Q1 2020. Magnit’s retail revenues increased by 17.6% YoY, after 9.2% YoY in Q4 2019. Yandex overshot analysts’ consensus on adjusted EBITDA by 7% and provided a positive surprise with its advertising revenues, which rose by 11% YoY. Ros Agro’s total revenues grew by 6% YoY on larger sales volumes across all segments except agriculture.
The metals & mining sector was the worst performer overall, mostly due to Mechel and Polymetal. Polymetal contracted on the back of falling gold prices. Mechel underperformed despite the lack of market-moving news.
Main Russian news
Key macroeconomic indicators were mixed in March. Quarantine measures against COVID-19 hit industrial production, with growth rates in the manufacturing segment slowing and a decline in the activity in the extraction segment. On the other hand, retail sales improved in both the food and non-food segments. Rosstat published real wage growth data for February, showing a deceleration to 5.7% YoY from 6.5% YoY in January.
The Ministry of Economic Development reported that GDP growth slowed to 0.9% YoY in March from 2.8% YoY in February. While there was some growth in the retail and services sectors, overall growth was hit by the weakening of the global economy, decreasing commodities prices and the quarantine measures put in place in Russia’s trading partner countries. One of the largest drags on growth was the transport sector. In the first quarter of 2020, GDP growth was 1.8%. The Central Bank of Russia expects GDP growth to slow by 4%-6% overall by the end of 2020.
To watch…
Rosstat is due to publish inflation figures for April 2020.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Vedomosti, Bloomberg, TKB Investment Partners (JSC); May 2020