Russian equity market dynamics
Last week, the Russian equity market rose in line with the other emerging markets (EM). The RTS index rose by 2.8%, while the MSCI EM index gained 2.9% (all figures in USD terms). All were supported by news headlines about new COVID-19 vaccine trials and recovering economic activity in the US and Europe.
The power utilities sector outperformed the broader market, mainly due to Rosseti and OGK-2, whose share prices rose by 14.1% and 13.2, respectively, in rouble terms. Both companies rose as a result of a correction after prior underperformance.
The oil and gas sector was the worst performer overall, mostly due to Novatek and Tatneft, whose shares fell by 4.5% and 2.2%, respectively, in rouble terms. Novatek declined under pressure from falling gas prices. Tatneft declined due to outflows following a decrease of the share’s weight in the MSCI Russia index as a result of rebalancing.
Main Russian news
Russia’s key macroeconomic indicators weakened in April. Quarantine measures continued to hit industrial production, with declines in both the extraction and manufacturing segments. Retail sales declined in both the food and non-food segments. Rosstat published real wage growth data for March, showing acceleration to 5.9% YoY from 5.7% YoY in February.
Fitch rating agency expects Russian GDP to decline by 5% in 2020. This is the second downgrade of the agency’s forecast since the beginning of April. It had earlier expected a contraction of 3.3%, which was a downgrade from the decrease of 1.4% forecast at the beginning of April. While Fitch forecast Russian GDP to fall by 8.1% in Q2 2020, the Ministry of Economic Development believes GDP contracted by 12% in April alone.
Fitch is forecasting economic growth of 1.7% in Q4 2020 and increased its forecast for Russian economic growth in 2021 to 3%. The Ministry of Economic Development and the Ministry of Finance expect a 5% decline in GDP in 2020. The Central Bank of Russia expects GDP to fall by 4%-6% in 2020, while the IMF is forecasting a 5.5% decline.
To watch…
Rosstat is due to publish inflation figures for May 2020.
Author: Aleksandra Kuznetsova, Junior Investment Specialist
Sources: Rosstat, Vedomosti, Bloomberg, TKB Investment Partners (JSC); June 2020
