Russian equity market dynamics
Last week, the Russian equity market rose, but by less than the broader emerging market (EM) index.
The lag was mainly due to a Russia-specific factor, with media headlines speculating that the EU will impose new sanctions over Alexei Navalny’s detention.
Main Russian news
The Central Bank of Russia (CBR) left its key rate at 4.25%. This is the fourth time in a row the regulator has left the rate unchanged. The decision was made on the back of inflation accelerating above the CBR’s forecast due to the recovery in demand at a time of limited product supply. The weakening of the rouble also added 1% to annual inflation. The regulator signaled it is set to end the rate-cut cycle , but said that it was too early to discuss rate hikes. The bank also raised its annual inflation forecast for 2021 from 3.5%-4.0% to 3.7%-4.2%. It expects inflation to peak in February-March at 5.5% and decline thereafter. According to the CBR’s governor, Elvira Nabiullina, the Russian economy may return to its pre-pandemic level by the end of 2021 . Previously, recovery to that level was expected only by mid-2022.
To watch…
Rosstat is due to publish macroeconomic figures for January 2021.
Author: Marina Tsutskiridze, Junior Investment Specialist
Sources: CBR, Vedomosti, Bloomberg, TKB Investment Partners (JSC); February 2021