Russian equity market dynamics
Last week, the Russian equity market outperformed the broader emerging markets by 0.5%.
There was no significant news which supported Russian equities, so the relative gain might have been due to Russia escaping from the pressure from factors that capped other emerging markets: weak Chinese PMI data and growing concern over the regulatory crackdown in China on a wide range of industries.
Main Russian news
Russia’s key macroeconomic indicators improved in July. Industrial production increased on an annualised basis in both the manufacturing and extraction segments. Retail sales strengthened in both the food and non-food segments, but by less than in June. Rosstat published real wage growth data for June which showed an increase of 4.9% YoY.
The Central Bank of Russia (CBR) published monetary policy guidelines for the period until 2024
Base scenario
2021
- Inflation (end of the year): 5.7-6.5%
- GDP growth: 4.0-4.5%
- Key rate (average): 5.5-5.8%
2022
- Inflation (end of the year): 4.0-4.5%
- GDP growth: 2.0-3.0%
- Key rate (average): 6.0-7.0%
2023
- Inflation (end of the year): 4.0%
- GDP growth 2.0-3.0%:
- Key rate (average): 5.0-6.0%
2024
- Inflation (end of the year): 4.0%
- GDP growth: 2.0-3.0%
- Key rate (average): 5.0-6.0%
The policy guidelines also included three alternative scenarios:
- Worsening Pandemic scenario: This assumes new pandemic-fighting restrictions that will lead to decline in demand. In this case, the CBR believes it is reasonable to cut the key rate as early as H1 of 2022
- Global Inflation scenario: This assumes the steadier acceleration of global inflation by 2022, which in turn will spur the CBR to tighten monetary policy
- Financial Crisis scenario: This foresees how financial markets might respond to monetary policy normalisation in the US. As low rates have caused spikes in the debt burden, policy normalisation may provoke a credit crisis in certain countries. In the case, the CBR will substantially tighten monetary policy in early 2023.
Author: Marina Tsutskiridze, Investment Specialist
Sources: Rosstat, Bloomberg, TKB Investment Partners (JSC); September 2021